UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to
Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant
x
Filed by a Party other than the Registrant
¨
Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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x
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Definitive Proxy Statement
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¨
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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Ambac Financial Group, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was
determined):
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(4)
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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A
MBAC
F
INANCIAL
G
ROUP
, I
NC
.
N
OTICE
OF
2009 A
NNUAL
M
EETING
OF
S
TOCKHOLDERS
AND
P
ROXY
S
TATEMENT
dated March 25, 2009
Meeting Date:
Tuesday, May 5th, 2009
at
2:00 P.M. (local time)
Meeting Place:
Ambac Financial Group, Inc.
One State Street Plaza
New York,
New York 10004
Ambac Financial Group, Inc.
One State Street Plaza
New York, NY 10004
212.668.0340
March 25, 2009
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Dear Stockholders:
It is our pleasure to invite you to Ambacs 2009 Annual Meeting
of Stockholders.
We will hold the meeting on Tuesday, May 5, 2009, at 2:00 p.m.
at our executive offices in New York City. At the
stockholders
meeting, we will cover the business items, review the major
developments of 2008 and answer your questions.
This booklet includes the Notice of the 2009 Annual Meeting of
Stockholders and the Proxy Statement. The Proxy Statement
describes the business that we will conduct
at the meeting.
Your vote is important. Most stockholders have a choice
of
voting on the Internet, by telephone, or by mail using a
traditional proxy card. Please refer to the proxy card or other
voting instructions included with these proxy materials for
information on the voting methods available to you.
If you vote
by telephone or on the Internet, you do not need to return
your proxy card.
We look forward to seeing you at the meeting.
Sincerely,
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Michael A. Callen
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David W. Wallis
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Executive Chairman
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President and
Chief Executive Officer
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Ambac Financial Group, Inc.
One State Street Plaza
New York, NY 10004
212.668.0340
N
OTICE
OF
2009 A
NNUAL
M
EETING
OF
S
TOCKHOLDERS
March 25, 2009
Dear Stockholders:
We will hold the 2009 Annual Meeting of Stockholders on Tuesday, May 5th, 2009 at 2:00 p.m. (New York Time) at our executive offices at One State
Street Plaza in New York City. At the Annual Meeting, we will ask you to:
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Ratify the selection of KPMG LLP, an independent registered public accounting firm, as Ambacs independent auditors for 2009; and
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Consider any other business that is properly presented at the Annual Meeting.
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You may vote at the Annual Meeting if you were an Ambac stockholder at the close of business on March 9, 2009.
Along with the attached Proxy Statement, we are also sending
you the Ambac 2008 Annual Report, which includes our 2008 Annual Report on Form 10-K and financial statements.
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Anne Gill Kelly
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Managing Director, Corporate Secretary
and Assistant
General Counsel
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T
ABLE
OF
C
ONTENTS
P
ROXY
S
TATEMENT
F
OR
T
HE
A
MBAC
F
INANCIAL
G
ROUP
, I
NC
.
2009 A
NNUAL
M
EETING
OF
S
TOCKHOLDERS
I
NFORMATION
A
BOUT
T
HE
A
NNUAL
M
EETING
AND
V
OTING
Why Did You
Send Me this Proxy Statement?
We sent you this Proxy
Statement and the enclosed proxy card because Ambacs Board of Directors is soliciting your proxy to vote at the 2009 Annual Meeting of Stockholders.
This Proxy Statement summarizes the information you need to vote at the Annual Meeting. You do not need to attend the Annual Meeting to vote your shares.
You may simply complete, sign and return the enclosed proxy card or vote by telephone or over the Internet.
What Proposals will be Voted on at the Annual Meeting?
There are two proposals scheduled to be voted on at the Annual Meeting:
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The election of eight directors; and
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The ratification of the selection of KPMG LLP, an independent registered public accounting firm, as Ambacs independent auditors for 2009.
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What are Ambacs Boards
Voting Recommendations?
Ambacs Board recommends
that you vote your shares:
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FOR each of the nominees of the Board; and
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FOR the ratification of the selection of KPMG LLP, an independent registered public accounting firm, as Ambacs independent auditors for 2009.
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What if I Received in the Mail a Notice
of Internet Availability of Proxy Materials?
In
accordance with the Notice and Access rules adopted last year by the Securities and Exchange Commission (the
SEC
), we are providing access to our proxy materials over the Internet. Accordingly, on or about March 25,
2009, we mailed to our record and other beneficial stockholders a Notice of Internet Availability of Proxy Materials, which contains instructions on how to access our proxy materials over the Internet and vote online. If you have received a Notice
of Internet Availability of Proxy Materials, you will not receive a printed copy of our proxy materials by mail unless you request one. You may request to
receive a printed copy of our proxy materials for the 2009 Annual Meeting. If you wish to receive a printed copy of our proxy materials, you should follow
the instructions for requesting those materials included in the Notice of Internet Availability of Proxy Materials.
Who Is Entitled to Vote?
March 9, 2009 is the record date for the Annual Meeting. If you owned Ambac common stock at the close of business on March 9, 2009, you are
entitled to vote. On that date, there were 294,359,108 shares of Ambac common stock outstanding and entitled to vote at the Annual Meeting. Ambac common stock is our only class of voting stock. We will begin making this Proxy Statement available on
our website,
www.ambac.com
, on March 25, 2009 to all stockholders entitled to vote. If you wish to receive a printed copy of our proxy materials, you should follow the instructions for requesting those materials included in the Notice of
Internet Availability of Proxy Materials.
How Many Votes
Do I Have?
You have one vote for each share of Ambac
common stock that you owned at the close of business on March 9, 2009. The proxy card indicates the number.
What Is the Difference Between Holding Shares as a Stockholder of Record and Holding Shares in Street Name?
Most stockholders of Ambac hold their shares in street name
through a stockbroker, bank or other nominee rather than directly in their own name. As summarized below, there are some differences between shares held of record and those held in street name.
Stockholder of Record
If your shares are registered directly in your name with Ambacs
transfer agent, The Bank of New York Mellon, you are considered the stockholder of record of those shares and Ambac is providing you these proxy materials directly. As the stockholder of record, you have the right to grant your voting proxy directly
to Ambac or to vote in person at the Annual Meeting. If you wish to vote by mail, you must request paper copies of the proxy materials, which will included a proxy card for you to use. You may also vote on the Internet or by telephone as described
below under the heading May I Vote by Telephone or Via the Internet?.
Holders in Street Name
If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in street name and these proxy materials are being forwarded to
you by your broker or nominee who is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker or nominee on how to vote your shares and are also invited to attend the
Annual Meeting. However, since you are not the stockholder of record, you may only vote these shares in person at the Annual Meeting if you follow the instructions described below under the heading How Do I Vote In Person at the Annual
Meeting?. If you wish to vote by mail, you must
2
request paper copies of the proxy materials, which will include a voting instruction card for you to use in directing your broker or nominee how to vote your
shares. You may also vote on the Internet or by telephone as described below under the heading May I Vote by Telephone or Via the Internet?.
How Do I Vote by Proxy?
If you properly fill in your proxy card and send it to us in time to vote, your proxy
(one of the individuals named on your proxy card)
will vote your shares as you have directed. If you sign the proxy card but do not make specific choices, your proxy will vote your shares as recommended by the Board:
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FOR
Proposal 1
(Elect Eight Directors)
; and
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FOR
Proposal 2
(Ratify the Selection of KPMG LLP, an Independent Registered Public Accounting Firm, as Independent Auditors for 2009)
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If any other matter is presented, your proxy
will vote in accordance with his or her best judgment. At the time we began printing this Proxy Statement, we knew of no matters that needed to be acted on at the Annual Meeting, other than those discussed in this Proxy Statement.
May I Vote by Telephone or Via the Internet?
Yes. Instead of submitting your vote by mail on the enclosed proxy card, you
may be able to vote via the Internet or by telephone. Please note that there are separate Internet and telephone arrangements depending on whether you are a stockholder of record
(that is, if you hold your stock in your own name)
, or whether
you hold your shares in street name
(that is, if your stock is held in the name of your broker or bank)
.
If you are a stockholder of record, you may vote by telephone, or electronically through the Internet, by following the instructions provided on your
proxy card.
If you hold your shares in street
name, you should refer to the instructions provided by your bank or broker to determine whether you will be able to vote by telephone or electronically.
The telephone and Internet voting procedures are designed to authenticate stockholders identities, to allow stockholders to give their voting
instructions and to confirm that stockholders instructions have been recorded properly. If you vote by telephone or via the Internet, you may incur costs, such as usage charges from Internet access providers and telephone companies. You will
be responsible for those costs.
Whether or not you plan to
attend the Annual Meeting, we urge you to vote. Returning the proxy card or voting by telephone or over the Internet will not affect your right to attend the Annual Meeting and vote.
May I Revoke My Proxy?
Yes. If you change your mind after you send in your proxy card, you may revoke your proxy by following any of the procedures
described below. To revoke your proxy:
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Send in another signed proxy with a later date;
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Send a letter revoking your proxy to Ambacs Corporate Secretary at the address indicated on page 73 under Information about Stockholder Proposals;
or
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Attend the Annual Meeting and vote in person.
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3
How Do I Vote in Person at the Annual Meeting?
You may vote shares held directly in your name as the stockholder of record
in person at the Annual Meeting. If you choose to vote your shares in person at the Annual Meeting, please bring the enclosed proxy card or proof of identification. Even if you plan to attend the Annual Meeting, Ambac recommends that you vote your
shares in advance as described above so that your vote will be counted if you later decide not to attend the Annual Meeting.
You may vote shares beneficially owned and held in street name only if you obtain a signed proxy from the stockholder of record giving you the
right to vote the shares. If your shares are held in the name of your broker, bank or other nominee, you must bring to the Annual Meeting an account statement or letter from the broker, bank or other nominee indicating that you are the owner of the
shares and a signed proxy from the stockholder of record giving you the right to vote the shares. The account statement or letter must show that you were beneficial owner of the shares on March 9, 2009.
How Do Employees in the Ambac Stock Fund Vote?
If you are an employee who participates in our Savings Incentive Plan
(
SIP
), you are receiving this material because of shares held for you in the Ambac Stock Fund in the SIP. The SIP Trustee will send you a voting instruction card instead of a proxy card. This voting instruction card will
indicate the number of shares of Ambac common stock credited to your account in the Ambac Stock Fund as of March 9, 2009.
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If you complete, sign and return the voting instruction card on time, the SIP trustee will vote the shares as you have directed.
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If you do not complete, sign and return the voting instruction card on time, the SIP trustee will not vote the shares credited to your account.
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What Votes Need to be Present to Hold
the Annual Meeting?
We need a majority of the shares
of Ambac common stock outstanding on March 9, 2009 to be present, in person or by proxy, to hold the Annual Meeting.
What Vote Is Required to Approve Each Proposal?
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Proposal 1:
Elect Eight
Directors
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The eight nominees for director who receive the most votes will be elected. If you do not vote for a nominee or you indicate withhold authority to vote for any nominee on your proxy
card, your vote will not count either for or against the nominee.
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Proposal 2:
Ratify Selection
of Independent Auditors
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The affirmative vote of a majority of the votes present and entitled to vote at the Annual Meeting is required to ratify the selection of KPMG LLP, an independent registered public accounting
firm, as independent auditors for 2009. If you abstain from voting, it has the same effect as if you voted against this proposal.
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4
How are Votes Counted?
In the election of directors, your vote may be cast FOR all of the nominees or your vote may be
WITHHELD with respect to one or more of the nominees. For other proposals, your vote may be cast FOR or AGAINST or you may ABSTAIN. If you ABSTAIN, it has the same effect as a vote
AGAINST. If you sign your proxy card or broker voting instruction card with no further instructions, your shares will be voted in accordance with the recommendations of the Board.
What Is the Effect of Broker Non-Votes?
A broker non-vote occurs when a broker holding shares for a
beneficial owner does not vote on a particular proposal because the broker does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner. Under the rules of the New York Stock Exchange,
if your broker holds your shares in its street name, the broker may vote your shares on Proposal 1
(Elect Eight Directors)
and Proposal 2
(Ratify Selection of Independent Auditors)
even if it does not receive instructions
from you. As a result, there will be no broker non-votes.
Is Voting Confidential?
We maintain a policy of keeping all the proxies and ballots confidential. The Inspectors of Election will forward to management any written comments that you make on the proxy card.
If More than One Member of My Household Owns Shares, Will We Receive
Separate Annual Meeting Materials?
We have adopted a
procedure approved by the SEC called householding. Under this procedure, we are sending only one Annual Report and Proxy Statement to stockholders who do not participate in electronic delivery of proxy materials and who have the same
address and last name unless one or more of these stockholders notifies us that they wish to continue receiving individual copies. This householding practice reduces our printing and postage costs. Stockholders who do not participate in
electronic delivery of proxy materials may request a separate copy of the Annual Report and Proxy Statement as follows:
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Stockholders of record wishing to discontinue or begin householding, or any stockholder of record residing at a household address wanting to request delivery of a
copy of the Annual Report and Proxy Statement, should contact our transfer agent, The Bank of New York Mellon Shareowner Services, at (800) 524-4458, TDD for hearing impaired: 800-231-5469; for Foreign Stockholders: 201-680-6578; and TDD for
Foreign Stockholders: 201-680-6610 or stockholders of record may otherwise write to The Bank of New York Mellon Shareowner Services at P.O. Box 358015, Pittsburgh, PA 15252-8015. The website address is
www.bnymellon.com/shareowner/isd
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Stockholders whose shares are held in street name can request information about householding from their banks, brokers or other holders of record.
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5
What Are the Costs of Soliciting these Proxies and Who Will Pay Them?
Ambac will pay all the costs of soliciting these proxies. Although we are
providing these proxy materials over the Internet and, in some cases, by mail, our directors and employees may also solicit proxies by telephone, by fax or other electronic means of communication, or in person. We will reimburse banks, brokers,
nominees and other fiduciaries for the expenses they incur in forwarding the proxy materials to you. The Bank of New York Mellon Corporation is assisting us with the solicitation of proxies for a fee of $7,000 plus out-of-pocket expenses.
Where Can I Find the Voting Results?
We will publish the voting results in our
Form 10-Q
for the second
quarter of 2009, which we will file with the SEC in August 2009. You can find the Form 10-Q on Ambacs website at
www.ambac.com
.
Do Directors Attend the Annual Meeting?
Ambac encourages directors to attend Ambacs Annual Meeting of Stockholders. Last year, all of our directors attended the Annual Meeting.
Can a Stockholder Communicate Directly with our Board? If so, How?
Stockholders and other interested parties may
communicate with Ambacs Presiding Director, Jill Considine, by sending her an e-mail at
presidingdirector@ambac.com
or by writing Ms. Considine c/o Ambac Financial Group, Inc., Attn: Corporate Secretary, One State Street
Plaza, New York, New York 10004. You also may communicate with other members of our Board by writing to Ambacs Corporate Secretary at Ambac Financial Group, Inc., One State Street Plaza, New York, New York 10004 or by sending an e-mail to
Ambacs Corporate Secretary at
akelly@ambac.com
. Ambacs Corporate Secretary will then forward your questions or comments directly to the Board.
Communications are distributed to the Presiding Director, the Board or to any individual director or directors as appropriate, depending on
facts and circumstances outlined in the communication. In that regard, the Presiding Director and Ambacs Board of Directors have requested that certain items that are unrelated to the duties and responsibilities of the Board should be
excluded, such as:
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junk mail and mass mailings;
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new product suggestions;
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resumes and other forms of job inquiries;
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business solicitations or advertisements.
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6
In addition, material that is indirectly hostile, threatening, illegal or similarly unsuitable will not
be forwarded. Any communication that is relevant to Ambacs business and is not forwarded will be retained for one year and will be made available to the Presiding Director and any other independent director on request. The independent
directors grant the Corporate Secretary discretion to decide what correspondence shall be shared with Ambac management and specifically instruct that any personal employee complaints be forwarded to our Human Resources Department.
Whom Should I Call If I Have Any Questions?
If you have any questions about the Annual Meeting or voting, please contact
Anne Gill Kelly, Corporate Secretary, at (212) 208-3355 or at
akelly@ambac.com
.
If you have any questions about your ownership of Ambac common stock, please contact
Vandana Sharma, First Vice President, Investor Relations, at
(212) 208-3333 or at
vandana.sharma@ambac.com
.
7
I
NFORMATION
A
BOUT
A
MBAC
C
OMMON
S
TOCK
O
WNERSHIP
Which Stockholders own at least 5% of Ambac?
The following table shows all persons we know to be direct or indirect owners of at least 5% of Ambac common stock as of December 31,
2008. Our information is based on reports filed with the SEC by each of the firms listed in the table below. You may obtain these reports from the SEC.
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Name and Address of Beneficial Owner
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Number of
Shares Owned
Beneficially
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Percent of
Class (%)
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Third Avenue Management LLC(1)
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27,022,362
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9.4
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622 Third Avenue, 32
nd
Floor
New York, NY 10017
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Citigroup Inc.(2)
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21,154,033
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7.2
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399 Park Avenue
New York, New York 10043
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FMR LLC(3)
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15,501,535
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5.4
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82 Devonshire Street
Boston, Massachusetts 02109
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(1) This information is based on a Schedule 13G filed with the Securities and Exchange Commission on
February 13, 2009 by Third Avenue Management LLC, which reported voting power and dispositive power as of December 31, 2008 as follows: Sole Voting Power 27,022,362, Shared Voting Power None, Sole Dispositive Power
27,022,362, and Shared Dispositive Power None.
(2) This information is based on a Schedule 13G filed with the Securities and Exchange Commission on February 9, 2009 by Citigroup Inc., which reported voting power and dispositive power as
of December 31, 2008 as follows: Sole Voting Power None, Shared Voting Power 21,154,033, Sole Dispositive Power None, and Shared Dispositive Power 21,154,033. Figures assume conversion exercise of certain securities
held and includes shares held by the following: Citigroup Global Markets Inc. with Sole Voting Power None, Shared Voting Power 21,124,212, Sole Dispositive Power None, and Shared Dispositive Power 21,124,212; and
Citigroup Financial Products Inc, with Sole Voting Power None, Shared Voting Power 21,124,301, Sole Dispositive Power None, and Shared Dispositive Power 21,124,301; Citigroup Global Markets Holdings Inc., with Sole Voting
Power None, Shared Voting Power 21,124,301, Sole Dispositive Power None, and Shared Dispositive Power 21,124,301.
(3) This information is based on a Schedule 13G filed with the Securities and Exchange Commission on
February 13, 2009 by FMR LLC, which reported voting power and dispositive power as of December 31, 2008 as follows: Sole Voting Power 341,120, Shared Voting Power None, Sole Dispositive Power 15,501,535, and Shared
Dispositive Power None.
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8
How Much Stock is Owned By Directors and Executive Officers?
The following table shows the Ambac common stock owned directly or indirectly
by Ambacs directors, director nominees and executive officers as of February 1, 2009. No director, director nominee or executive officer beneficially owns 1% or more of the shares of Ambac common stock. All directors, director nominees
and executive officers as a group beneficially own less than 1% of the shares of Ambac common stock.
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Name of Beneficial Owner
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Number of
Shares
Beneficially
Owned
(4)(5)(6)(7)(8)
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Percent of
Class
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Unvested
RSUs(9)
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PSUs(10)
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Total Holdings
(including RSUs
and PSUs)
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Non-Employee Directors and Director Nominees
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Jill M. Considine
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28,361
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36,784
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55,860
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121,005
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Paul R. DeRosa
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500
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27,988
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0
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28,488
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Philip N. Duff
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650
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35,881
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0
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36,531
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Thomas C. Theobald
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39,966
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36,784
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6,030
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82,780
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Laura S. Unger
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12,396
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104,116
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17,715
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134,227
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Henry D.G. Wallace
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16,524
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36,789
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38,732
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92,045
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Named Executive Officers
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Michael A. Callen(1)
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217,019
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35,881
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13,968
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266,868
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David W. Wallis(1)
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81,072
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399,774
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0
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480,846
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Robert J. Genader(1)
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1,256,678
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0
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0
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1,256,678
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Sean T. Leonard
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40,562
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48,034
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0
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88,596
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Kevin J. Doyle
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105,425
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40,212
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0
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145,637
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Douglas C. Renfield-Miller
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146,492
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66,047
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0
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212,539
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Robert Shoback
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94,950
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41,745
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0
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136,695
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John W. Uhlein III(2)
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275,409
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0
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0
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275,409
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William T. McKinnon(3)
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190,317
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0
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0
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190,317
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|
|
All executive officers and directors as a group
(15 persons)
|
|
949,509
|
|
|
|
|
|
992,938
|
|
|
132,305
|
|
|
2,074,752
|
|
|
(1)
|
On January 16, 2008, Mr. Genader retired from Ambac and Ambac Assurance as Chairman, President and Chief Executive Officer. He no longer serves as either a director or an
executive officer. On January 16, 2008, Mr. Callen became the Chairman of the Board of Directors and the Interim President and Chief Executive Officer of Ambac and Ambac Assurance. On October 21, 2008, Mr. Wallis was named the
new President and Chief Executive Officer of Ambac and Ambac Assurance. Mr. Callen continues to serve as the Executive Chairman of Ambac and Ambac Assurance.
|
|
(2)
|
On February 1, 2009 Mr. Uhlein resigned as Senior Vice President of Ambac and Ambac Assurance. He no longer has any affiliation with Ambac or Ambac Assurance.
|
|
(3)
|
On February 8, 2008 Mr. McKinnon retired as Chief Risk Officer of Ambac and Ambac Assurance. He no longer has any affiliation with Ambac or Ambac Assurance.
|
|
(4)
|
To our knowledge, except for Mr. Genader, who shares voting and investment power with his spouse, each of the directors and named executive officers has sole voting and
investment power over the shares held in his or her name.
|
|
(5)
|
The number of shares shown for Mr. Uhlein includes 90 shares owned by his spouse in her IRA and 75 shares owned by him in an IRA.
|
9
|
|
The number of shares shown for Mr. Theobald includes 3,000 shares for which Mr. Theobald acts as trustee for each of two children. There are 1,500 shares in a separate
trust for each child. Mr. Theobald disclaims beneficial ownership of these 3,000 shares.
|
|
(6)
|
The number of shares shown for each director and named executive officer includes shares that may be acquired upon exercise of stock options that were exercisable as of
February 1, 2009 or that will become exercisable within 60 days after February 1, 2009. These shares are shown in the following table:
|
|
|
|
|
|
|
|
|
Non-Employee Directors
|
|
Number Of Shares
|
|
Executive Officers
|
|
Number Of Shares
|
Ms. Considine
|
|
7,500
|
|
Mr. Callen
|
|
7,500
|
Mr. DeRosa
|
|
0
|
|
Mr. Wallis
|
|
47,500
|
Mr. Duff
|
|
0
|
|
Mr. Genader
|
|
685,000
|
Mr. Theobald
|
|
0
|
|
Mr. Leonard
|
|
28,141
|
Ms. Unger
|
|
5,938
|
|
Mr. Doyle
|
|
73,184
|
Mr. Wallace
|
|
0
|
|
Mr. Renfield-Miller
|
|
86,184
|
|
|
|
|
Mr. Shoback
|
|
57,267
|
|
|
|
|
Mr. McKinnon
|
|
116,150
|
|
|
|
|
Mr. Uhlein
|
|
98,884
|
|
(7)
|
The number of shares shown for each executive officer also includes the number of shares of Ambac common stock owned indirectly as of February 1, 2009 by the executive officer
in our Savings Incentive Plan (
SIP
). Our information on these shares is based on reports from the SIP Trustee.
|
|
|
(8)
|
The number of shares shown for (i) Messrs. Callen, Doyle, Renfield-Miller, Shoback and Uhlein, includes vested restricted stock units (
RSUs
) awarded under
our equity plans and (ii) Messrs. Theobald and Wallace, Ms. Considine and Ms. Unger include RSUs awarded under the Directors Plan. These RSUs are shown in the following table:
|
|
|
|
|
Executive Officers
|
|
Number of Vested RSUs
|
Mr. Callen
|
|
9,889
|
Mr. Wallis
|
|
0
|
Mr. Genader
|
|
0
|
Mr. Leonard
|
|
0
|
Mr. Doyle
|
|
0
|
Mr. Renfield-Miller
|
|
23,663
|
Mr. Shoback
|
|
5,428
|
Mr. Uhlein
|
|
1,009
|
Mr. McKinnon
|
|
0
|
|
|
Directors
|
|
Number of Vested RSUs
|
Ms. Considine
|
|
5,596
|
Mr. DeRosa
|
|
|
Mr. Duff
|
|
0
|
Mr. Theobald
|
|
1,425
|
Ms. Unger
|
|
5,533
|
Mr. Wallace
|
|
1,425
|
|
(9)
|
This column shows the following grants of RSUs under the Directors Plan: 3,203 RSUs to Mr. Wallace at the 2004 Annual Meeting and accrued dividends, 3,198 RSUs to
Ms. Considine and Mr. Theobald at the 2005 Annual Meeting and accrued dividends and 2,295 RSUs to Messrs. Callen and Duff at the 2007 Annual Meeting and accrued dividends; and 70,530 RSUs granted to Ms. Unger at the 2008 Annual
Meeting and accrued dividends. These RSUs generally will vest on the date of the Annual Meeting held in the fifth calendar year following the date of grant. At that time, each of these directors will receive one share of Ambac common stock in
settlement of each RSU. For more information on these RSUs, see below at page 16 under How We Compensate Directors.
|
|
10
|
|
In addition, this column includes the 33,586 RSUs and accrued dividends that were granted to each of Messrs. Callen, Duff, Theobald and Wallace, Ms. Considine and
Ms. Unger at the 2008 Annual Meeting under the Directors Plan. These RSUs generally will vest on the date of the Annual Meeting held in the first calendar year following the date of grant. At that time, each of these directors will receive one
share of Ambac common stock in settlement of each RSU. For more information on these RSUs, see below at page 16 under How We Compensate Directors.
|
|
|
|
In addition, in connection with his appointment to the Board of Directors, Mr. DeRosa received 27,988 RSUs. These will vest on July 7, 2010. At that time, he will receive
one share of Ambac common stock in settlement of each RSU.
|
|
|
|
This column also includes RSUs that were awarded to Messrs. Doyle and Uhlein as part of each of their long-term compensation awards granted in January 2007 and January 2008 and
accrued dividends. This column also shows RSUs for Mr. Renfield-Miller which was awarded as part of his 2006 bonus pursuant to the Ambac Deferred Compensation SubPlan of the 1997 Equity Plan (the
SubPlan
) and accrued
dividends and each of his long-term compensation awards granted in January 2007 and January 2008 and accrued dividends. This column includes RSUs for Mr. Leonard, which were awarded as part of his 2006 bonus pursuant to the SubPlan and accrued
dividends, and his long term compensation awards granted in January 2007 and January 2008. This column also includes RSUs that were awarded to Mr. Wallis as part of his 2007 bonus pursuant to the SubPlan and accrued dividends, and his
long-term compensation awards granted in January 2007 and January 2008 and accrued dividends. This column also shows RSUs for Mr. Shoback which were awarded as part of his 2006 and 2007 bonuses pursuant to the SubPlan and accrued dividends and each
of his long-term compensation awards granted in January 2007 and January 2008 and accrued dividends. See page 60 for more detailed descriptions of these awards made pursuant to the SubPlan.
|
|
|
(10)
|
Under Ambacs Deferred Compensation Plan for Outside Directors, directors may defer a portion of his or her cash compensation. If a director has elected to defer cash
compensation into Phantom Stock Units (
PSUs
), these PSUs are shown in this column. For more information on the Deferred Compensation Plan, see page 19.
|
|
|
(11)
|
We have included only Ambacs current non-employee directors and executive officers who are as follows:
|
|
|
|
Directors
: Messrs. DeRosa, Duff, Theobald and Wallace, Ms. Considine and Ms. Unger; and
|
|
|
|
Executive Officers
: Messrs. Callen, Wallis, Leonard, Doyle, Renfield-Miller, Shoback, Bienstock and Stevens and Ms. Adams. Please see pages 27 to 29 for a list of
Ambacs executive officers and their responsibilities.
|
|
Did Ambac Insiders Comply with Section 16(a) Beneficial Ownership Reporting in 2008?
Section 16(a) of the Securities Exchange Act of 1934 requires that our insidersour directors, executive officers, and greater-than-10%
stockholdersfile reports with the SEC and the New York Stock Exchange on their initial beneficial ownership of Ambac common stock and any subsequent changes. Our insiders must also provide us with copies of the reports.
We reviewed copies of all reports furnished to us and obtained written
representations from our insiders that no other reports were required. Based on this, we believe that all of our insiders complied with their filing requirements for 2008.
11
I
NFORMATION
A
BOUT
D
IRECTORS
The Board of Directors
The Board oversees the business of Ambac and monitors the performance of
management. In accordance with corporate governance principles, the Board does not involve itself in day-to-day operations. The directors keep themselves informed by discussing matters with the Executive Chairman, the Chief Executive Officer, other
key executives and our principal external advisors (
legal counsel, outside auditors, investment bankers and other consultants
) by reading the reports and other materials that they request or that we send them regularly and by participating in
Board and committee meetings.
The Board usually meets five
times per year in regularly scheduled meetings, but will meet more often, if necessary. The Board met 31 times during 2008 and its committees met a total of 15 times. The Board and the committee meetings reflect 26 special meetings held during the
year. All directors attended at least 75% of the Board meetings and the meetings of the committees of which they were members, except for Mr. Duff, who attended 68% of all the meetings due to schedule conflicts with a number of the special
meetings.
Each of our directors also serves as a director of
our principal operating subsidiary, Ambac Assurance Corporation, a financial guarantee insurance company.
Director Independence
Ambacs Corporate Governance Guidelines express the Boards belief that a substantial majority of Ambacs directors should qualify as independent directors under the guidelines of the New
York Stock Exchange (
NYSE
). In accordance with NYSE rules, the Board affirmatively determines the independence of each Director and nominee for election as a Director in accordance with its Policy Regarding Determination of
Independence (
Director Independence Policy
), which includes all elements of independence as set forth in the NYSE listing standards. The Director Independence Policy is attached to this proxy statement as Appendix A and is
also appended to Ambacs Corporate Governance Guidelines available at
www.ambac.com
. Under the Director Independence Policy, a director is not independent if he or she has a direct or indirect material relationship with Ambac. The
Governance Committee annually reviews the relationships that each director has with Ambac. In conducting this review, the Governance Committee considers all relevant facts and circumstances, including the directors commercial, banking,
consulting, legal, accounting, charitable and familial relationships and such other criteria as the Governance Committee may determine from time to time.
Following such annual review, the Governance Committee reports its conclusions to the full Board, and only those directors whom the Board affirmatively
determines to have no material relationship with Ambac and otherwise satisfy the Director Independence Policy are considered independent directors.
Based on the review and recommendation of the Governance Committee, the Board has determined that the following directors are independent within the
meaning of Ambacs Director Independence Policy: Jill M. Considine, Paul R. DeRosa, Philip N. Duff, Thomas C. Theobald, Laura S. Unger and Henry D.G. Wallace. The Board also determined that Michael A. Callen now has a material relationship with
Ambac, as he was elected Ambacs Chairman and Interim President and Chief Executive Officer, as of January 16, 2008, and as of October 21, 2008 is continuing as Ambacs Executive Chairman. As a result of his continuing executive
role, Mr. Callen is deemed by the Board not to be independent under Ambacs Director Independence Policy. The Board also determined that David W. Wallis has a material relationship with Ambac as he has been an employee of Ambac since 1996
and now serves as its President and Chief Executive Officer. Accordingly, Mr. Wallis is deemed by the Board not to be independent under Ambacs Director Independence Policy.
12
The Committees of the Board
The Board has three standing committees: the Audit and Risk Assessment Committee, the Governance Committee and the
Compensation Committee. None of the directors who serve as members of these committees is, or has ever been, an employee of Ambac or our subsidiaries. All of the directors who serve as members of these committees are independent in accordance with
the rules of the NYSE and Ambacs Director Independence Policy.
The Audit and Risk Assessment Committee
|
The Audit and Risk Assessment Committee (i) selects the independent auditors; (ii) approves the scope of the annual audit by the independent auditors and our internal auditors;
(iii) reviews audit findings and accounting policies; (iv) pre-approves all audit, audit-related and other services, if any, to be provided by the independent auditors; (v) assesses the adequacy of internal controls and risk
management; (vi) reviews and approves Ambacs financial disclosures; and (vii) oversees compliance with Ambacs Code of Business Conduct.
|
Additionally, the Audit and Risk Assessment Committee reviews and monitors the adequacy of Ambacs portfolio risk management, which
includes reviewing (i) its adversely classified credits, (ii) the sufficiency of its loss reserves and (iii) its economic risk capital. The Audit and Risk Assessment Committee also reviews compliance with risk management and
underwriting policies related to Ambacs insured book of business, derivatives business and investment portfolios. The Chief Risk Officer reports to the Board of Directors on a dotted line basis and will inform and update the Audit
and Risk Assessment Committee with respect to risk-related topics. The Chief Risk Officer is empowered to veto any transaction that has been approved by a credit committee. However, the CEO may override the Chief Risk Officers veto, upon
notice to the Chairman of the Audit and Risk Assessment Committee.
The Audit and Risk Assessment Committee also meets outside the presence of Ambac management, with both the independent auditors and the internal auditors. The Audit and Risk Assessment Committees Report for 2008 is printed below at
pages 25 and 26.
Four out of six of the members of the Audit
and Risk Assessment Committee qualify as audit committee financial experts as such term is defined in the applicable SEC regulations. For a list of audit committee financial experts, please see the Audit and Risk
Assessment Committee Report on page 25 and 26.
The
Board has adopted a written charter for the Audit and Risk Assessment Committee. A copy of the Charter is available at our website:
http://www.ambac.com
. A copy of the Audit and Risk Assessment Committee Charter is also available to
stockholders free of charge on request to Anne Gill Kelly, our Corporate Secretary, at 212-208-3355 or
akelly@ambac.com
.
The Audit and Risk Assessment Committee met eight times during 2008.
13
Messrs. DeRosa, Duff, Theobald and Wallace, Ms. Considine and Ms. Unger currently serve as
members of the Audit and Risk Assessment Committee. Mr. Wallace serves as Chair of the Audit and Risk Assessment Committee.
The Governance Committee
|
The Governance Committee is responsible for monitoring Ambacs corporate governance policies and procedures and identifying, evaluating and recommending qualified candidates to the Board for election as
directors. Through its monitoring of Ambacs corporate governance policies and procedures, it is responsible for making recommendations concerning the size, structure and composition of the Board and committees, fees for the Board and criteria
for retention of directors.
|
The Governance
Committee will consider individuals recommended by stockholders for nomination as a director in accordance with the procedures described on page 73 under Information About Stockholder Proposals.
The Governance Committee reviews with the Board on an annual basis the
appropriate skills and characteristics required of Board members in the context of the then-current composition of the Board. This assessment includes, in addition to the qualities of intellect, integrity and judgment, diversity, a strong
understanding of finance and senior management experience.
The Governance Committee evaluates all nominees for director based on these criteria, including nominees recommended by stockholders. Under the Governance Committees charter, the Governance Committee has the sole authority to retain
and terminate any search firm used to identify director candidates and to approve the fees and other retention terms for such firm.
The Board has adopted a written charter for the Governance Committee. A copy of the Governance Committee charter is available at our website:
http://www.ambac.com
. A copy of the Governance Committee charter is also available to stockholders free of charge on request to Anne Gill Kelly, our Corporate Secretary, at 212-208-3355 or at
akelly@ambac.com
.
The Governance Committee met three times during 2008.
Messrs.DeRosa Duff, Theobald and Wallace and Ms. Considine and
Ms. Unger currently serve as members of the Governance Committee. Ms. Unger serves as Chair of the Governance Committee.
The Compensation Committee
|
The Compensation Committee oversees Ambacs compensation and employee benefit plans and practices. As outlined in its Charter, the Compensation Committee, among other things, (i) adopts
and annually reviews the overall compensation philosophy and policy of Ambac; (ii) adopts and annually reviews a comprehensive statement of executive compensation philosophy, strategy and principles; (iii) selects the peer
|
14
|
group of companies that is used in determining competitive compensation packages; (iv) evaluates the performance of our named executive officers,
including the Chief Executive Officer, and determines and approves the compensation of each of them; (v) reviews and evaluates succession planning for the Executive Chairman, CEO and other key management positions; (vi) reviews the
performance standards for executive officers to be used in succession planning and in our compensation programs; (vii) evaluates existing and proposed employee benefit plans, including any employment, severance and perquisites arrangements for
executive officers, and approves all substantive plan changes; (viii) reviews and approves our incentive bonus pool for the year; and (ix) reviews our stock ownership guidelines. In addition, our Compensation Committee administers our
Equity Plan (and has the sole authority for awards made under the Equity Plan) as well as the Ambac 1997 Executive Incentive Plan (the
EIP
), the Ambac Deferred Compensation Plan for Outside Directors and the Ambac Deferred
Compensation SubPlan of the 1997 Equity Plan (the
SubPlan
).
|
The Compensation Committee also provides oversight in the development, implementation and effectiveness of Ambacs Human Resources function,
including but not limited to those policies and strategies regarding retention, career development and progression, diversity and other employment practices. The Compensation Committee is also responsible for periodically reviewing Ambacs
plans regarding succession of senior management.
The
Compensation Committee has engaged Alan Johnson, a Managing Director of Johnson Associates, an outside human resources consulting firm, as its compensation consultant. The Compensation Committee asks Mr. Johnson, among other things, to provide
peer company compensation data and conduct an annual review of its total compensation program for its executive officers. For a fuller description of the role of the Compensation Committees compensation consultant, please refer to Role
of Compensation Consultant in the Compensation Discussion and Analysis section of this Proxy Statement. Management also provides information and proposals for the Compensation Committees consideration. While the CEO and the Senior Vice
President, Chief Administrative Officer attend Compensation Committee meetings regularly by invitation, the Compensation Committee is the final decision maker for the compensation of our named executive officers and other executive officers. The
Compensation Committee also considers certain matters in executive session. The Compensation Committees Chairman reports to the Board on actions taken at each meeting. The Compensation Committee has authority to retain, approve fees for and
terminate independent advisors to assist in fulfilling its responsibilities.
The Board has adopted a written charter for the Compensation Committee. A copy of the charter is available at our website:
http://www.ambac.com
. A copy of the Compensation Committee charter is also available to
stockholders free of charge on request to Anne Gill Kelly, our Corporate Secretary, at 212-208-3355 or at
akelly@ambac.com
.
15
The Compensation Committee met four times during 2008.
Messrs. DeRosa, Duff, Theobald and Wallace, Ms. Considine and
Ms. Unger currently serve as members of the Compensation Committee. Mr. Theobald serves as Chair of the Compensation Committee.
How We Compensate Directors
|
|
|
|
|
|
|
|
|
|
|
Director Compensation
Table
|
|
Name(a)
|
|
Fees Earned or
Paid in
Cash
($)(b)(1)
|
|
Stock
Awards
($)(c)(2)
|
|
All Other
Compensation
($)(g)(4)
|
|
Total
($)(h)
|
|
Michael A. Callen
(3)
|
|
6,370
|
|
0
|
|
20,000
|
|
26,370
|
|
Jill M. Considine
(3)
|
|
169,514
|
|
91,667
|
|
16,250
|
|
277,430
|
|
Paul R. DeRosa
|
|
51,194
|
|
19,306
|
|
0
|
|
70,500
|
|
Philip N. Duff
|
|
85,500
|
|
120,407
|
|
0
|
|
205,907
|
|
W. Grant Gregory
(3)
|
|
2,849
|
|
0
|
|
0
|
|
2,849
|
|
Thomas C. Theobald
|
|
108,500
|
|
120,357
|
|
20,000
|
|
248,857
|
|
Laura S. Unger
(3)
|
|
109,733
|
|
117,837
|
|
5,925
|
|
233,495
|
|
Henry D.G. Wallace
|
|
114,500
|
|
120,358
|
|
0
|
|
234,858
|
|
(1)
|
This amount includes any fees deferred by our directors into phantom stock units pursuant to Ambacs Director Deferred Compensation Plan.
|
In 2008, Michael Callen received a prorated fee in the amount of $3,288 for
service as a non-employee director and $3,082 for his service as Presiding Director through January 15, 2008 when he took over as Chairman and Interim President and Chief Executive Officer.
Additionally, in 2008, W. Grant Gregory was paid a prorated fee of $2,849
until his retirement on January 13, 2008. Mr. Gregory is no longer associated with Ambac.
This column reflects a prorated annual retainer fee of $80,000 for each of our directors, until April 1, 2008, at which point Ambac began paying its
directors an annual retainer of $50,000. In addition, beginning April 1, 2008, Ambac began paying a fee of $1,000 for attendance at each committee or shareholders meeting and $2,000 for attendance at each Ambac or Ambac Assurance Board meeting.
Fees for chairing the committees remained the same. Thus, in addition to the prorated annual retainer fees described above, each director also received the following:
|
·
|
|
Jill Considine earned a prorated fee of $69,247 for her role as Presiding Director (
term commenced on January 15, 2008),
and an additional $767,
prorated, for her service as Chairman of the Governance Committee (
term ended on January 15, 2008).
Ms. Considine also earned a total fee of $42,000 for her attendance at committee and Board meetings held between April 1, 2008 and
December 31, 2008.
|
|
·
|
|
Paul DeRosa was elected to the Board on July 7, 2008. He earned $27,000 for his attendance at committee and Board meetings held between April 1, 2008 and
December 31, 2008.
|
|
·
|
|
Philip Duff earned $28,000 for his attendance at committee and Board meetings held between April 1, 2008 and December 31, 2008.
|
16
|
·
|
|
In 2008, Thomas Theobald earned $10,000, for his role as Chairman of the Compensation Committee. Mr. Theobald also earned $41,000 for his attendance at
committee and Board meetings held between April 1, 2008 and December 31, 2008.
|
|
·
|
|
In 2008, Laura Unger earned a fee of $9,233 for her role as Chairman of the Governance Committee
(term commenced January 29, 2008)
. Ms. Unger also
received $43,000 for her attendance at committee and Board meetings held between April 1, 2008 and December 31, 2008.
|
|
·
|
|
Henry D. G. Wallace earned $20,000 for his role as Chairman of the Audit and Risk Assessment Committee. Mr. Wallace also received $37,000 for his attendance at
committee and Board meetings held between April 1, 2008 and December 31, 2008.
|
|
(2)
|
Represents the compensation costs for financial reporting purposes for the year under FAS 123R. See Note 13 to the Audited Financial Statements contained in Ambacs Annual
Report on Form 10-K for the fiscal year ended December 31, 2008 for the assumptions made in determining FAS 123R values. There can be no assurance that the FAS 123R amounts will be realized. Column (c) of the Director Compensation Table
includes a portion of each directors five year restricted stock award. The five-year grants reflected in the Table for Messrs. Callen, Duff, Gregory, Wallace and Theobald and Ms. Considine and Ms. Unger have a grant date fair value of
$210,000.
(See below on page 19 for a more detailed description of these awards.)
In addition, the amounts for Messrs. Callen, Gregory and Ms. Considine include costs due to unvested amounts being recognized in 2008 because they are
eligible for immediate vesting at retirement.
|
At December 31, 2008, the aggregate number of restricted stock units (
RSUs
) held by each of our directors was as follows: Mr. Callen45,773 RSUs; Ms. Considine42,383 RSUs;
Mr. DeRosa27,988; Mr. Duff35,881 RSUs; Mr. Theobald38,212 RSUs; Ms. Unger109,651 RSUs and Mr. Wallace38,216 RSUs.
Of the RSUs reported above, the following RSUs were vested but deferred: Mr. Callen9,890 RSUs; Ms. Considine5,596
RSUs; Mr. DeRosa0 RSUs; Mr. Duff0 RSUs; Mr. Gregory3,217 RSUs; Mr. Theobald1,425 RSUs; Ms. Unger5,533 RSUs and Mr. Wallace1,425 RSUs.
|
(3)
|
We have not awarded stock options to our non-employee directors since May 2003 and formally discontinued our stock option program for directors in 2004. All expenses related to the
stock options were recognized for financial accounting purposes before 2008.
|
At December 31, 2008, the aggregate number of stock options held by each of our directors was as follows: Mr. Callen7,500 options; Ms. Considine7,500 options; Mr. Gregory3,750
options and Ms. Unger5,938 options. All outstanding stock options have vested.
(4) The amounts shown represent matching corporate contributions, paid by Ambac in 2008 on behalf of the directors to charitable organizations under the Ambac Matching Gifts Program which allows up to $20,000 to be
matched for those charitable gifts made during each calendar year.
17
January to April 2008 Annual Cash Fee
|
From January 1, 2008 to March 31, 2008, we compensated directors who are not employees of Ambac or our subsidiaries under our prior Director Compensation structure, with an annual cash fee of
$80,000 per year. This fee was prorated for the period between January 1, 2008 and March 31, 2008. We did not pay our directors any additional fees for serving on committees of the Board or for attending meetings of the Board or of the
committees on which they serve from January 1, 2008 to March 31, 2008.
|
2008 Annual Cash Fee and Meeting Fees
|
In light of our directors significantly increased meeting schedule during the latter part of 2007 and 2008, effective April 1, 2008, we modified the structure of our directors cash
compensation in order to tie compensation more closely to our directors commitment to attending our Board and committee meetings. Beginning in April, 2008 our directors received (i) an annual prorated cash retainer of $50,000;
(ii) $2,000 for each meeting of the Ambac or Ambac Assurance Board that the director attended; and (iii) $1,000 for each meeting of a committee of the Board that the director attended. We did not change the annual fees for chairing a
committee (as described below).
|
Presiding Director Fee
|
In 2008, we paid an additional annual fee of $75,000 to Ambacs Presiding Director, in consideration of the substantial amount of additional time that the Presiding Director devotes to Ambac matters.
For more information regarding the Presiding Director, please see page 21 below.
|
Fee for Chairing a Committee
|
We pay an additional annual fee of $10,000 to the non-employee director who chairs either the Governance Committee or the Compensation Committee and an annual fee of $20,000 to the non-employee director who
chairs the Audit and Risk Assessment Committee.
|
Annual Award of Restricted Stock Units or Phantom Stock Units
|
On the date of the Annual Meeting, we grant each non-employee director an annual award consisting of a number of restricted stock units (
RSUs
) or Phantom Stock Units
(
PSUs
), as determined by the Board, (collectively the RSUs and PSUs shall be referred to as the
Director Stock Units
) calculated by dividing (A) $100,000 by (B) the closing price of a
share of common stock as reported on the NYSE on that date. The Director Stock Units generally will vest on the first anniversary of the date of the grant. The Director Stock Units will accumulate dividend equivalents in the form of additional
Director Stock Units during the restricted period. Director Stock Units granted in the form of RSUs are settled by the delivery of one share of Ambac common stock for each Director Stock Unit. Director Stock Units granted in the form of PSUs are
settled in cash in an amount equal to the market value, as of the relevant payment date, of one share of Ambac common stock for each Director Stock Unit. On March 25, 2008, upon a recommendation of the Governance Committee, the Board decided to
increase the annual Director Stock Unit award from $60,000 to $100,000. On January 27, 2009, the Board of Directors determined that all Director Stock Unit awards made in 2009 under the Directors Equity Plan shall consist of Phantom Stock
Units.
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18
Initial Award of Restricted Stock Units or Phantom Stock Units and Subsequent Awards Every Five Years
|
Ambac also grants each non-employee director, on the date of the Annual Meeting at which the director is first elected to the Board, an award of $210,000 of Director Stock Units. The number of Director Stock
Units included in this initial award is calculated by dividing (A) $210,000 by (B) the closing price of a share of common stock as reported on the NYSE on the date of the Annual Meeting. Director Stock Units granted in the form of RSUs
will be settled by the delivery of one share of Ambac common stock for each Director Stock Unit. Director Stock Units granted in the form of PSUs will be settled in cash.
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|
·
|
|
These Director Stock Units generally will vest on the date of the Annual Meeting held in the fifth year following the date of grant. However, if a director
(i) is required to retire due to Ambacs mandatory retirement policy; (ii) retires at age 62 after five or more years of service on Ambacs Board; or (iii) ceases to be a member as a result of death or permanent disability
or a change in control of Ambac, unvested Director Stock Units will vest and be settled as soon as practicable after termination of the directors service on the Board. Director Stock Units will accumulate dividend equivalents in the form of
additional Director Stock Units during the restricted period.
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|
·
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|
If the non-employee director remains on the Board after the first award of Director Stock Units vests, Ambac will grant the director a second award of Director
Stock Units, valued at $210,000 subject to similar vesting conditions and restrictions on transfer. Thereafter, awards will be made at every fifth Annual Meeting held during the directors continued service on the Board.
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Expenses and Benefits
|
Ambac reimburses all directors for travel and other related expenses incurred in attending stockholder, Board and committee meetings. We provide non-employee directors with life and health insurance
benefits, if they so elect. We also allow them to participate in our Matching Gift Program, under which Ambac will match gifts by non-employee directors to qualified organizations up to $20,000 per year.
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The Deferred Compensation Plan
|
Under the Ambac Deferred Compensation Plan for Outside Directors, non-employee directors may elect to defer all or part of their director compensation that is paid in cash.
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·
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At the directors election, we credit deferrals to a bookkeeping account that we maintain on the directors behalf either as a cash credit
(which we
credit with interest quarterly at a 90-day commercial paper composite rate published by the Federal Reserve Bank),
or as phantom stock units (
PSUs
) based on the market value of Ambacs common stock
(which we
credit with quarterly dividend equivalents in additional PSUs)
or as performance units measured by the performance of those mutual funds the director selects out of a limited group of funds.
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·
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We do not fund the Ambac Deferred Compensation Plan for Outside Directors. We settle accounts only in cash.
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19
Directors who are Ambac Employees
|
We do not compensate our employees or employees of our subsidiaries for service as a director, other than reimbursement for travel and related expenses.
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Director Stock Ownership Guidelines
|
In May 2004, Ambacs Governance Committee established stock ownership requirements for its directors. Ambac now requires each director to own, within five years of first being elected, shares of Ambac
common stock having a value equal to at least five times the directors annual cash retainer. In March 2008, the Board determined that in connection with the new lower annual cash retainer fee, it was appropriate to increase the director stock
ownership requirement from five times to eight times the directors annual cash retainer. The Committee has currently suspended application of this requirement in view of the recent and significant decline in stock price; however, our directors
are still expected to continue to increase their stock ownership.
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20
C
ORPORATE
G
OVERNANCE
In General
|
Our Board of Directors has maintained corporate governance policies for many years. We have reviewed internally and with the Board the provisions of the Sarbanes-Oxley Act of 2002, the rules of the SEC and
the NYSEs listing standards regarding corporate governance policies and processes and are in compliance with the rules and listing standards. We have adopted charters for our Audit and Risk Assessment Committee, Governance Committee and
Compensation Committee, consistent with the applicable rules and standards. Copies of the Corporate Governance Guidelines and the charters of the foregoing committees are available at our website:
http://www.ambac.com
. A copy of the Corporate
Governance Guidelines is also available to stockholders free of charge on request to Anne Gill Kelly, our Corporate Secretary, at 212-208-3355 or at
akelly@ambac.com
.
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Presiding Independent Director
|
On an annual basis, the non-employee directors will select a non-employee member of the Board to serve as the Presiding Director. The Presiding Director shall be independent as defined under the listing
standards of the NYSE. Michael Callen served as the Presiding Director at the beginning of 2008; however, as a result of the Boards decision to appoint Mr. Callen as Ambacs Interim President and Chief Executive Officer in the middle
of January 2008, he was no longer considered to be independent and could no longer serve as Ambacs Presiding Director. On January 29, 2008, the Board appointed Jill Considine as its new Presiding Director.
|
The Presiding Director has the following duties:
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·
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Chair all meetings of the Board at which the Chairman is not present;
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·
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Meet with the CEO for a preliminary review of financial results and to establish and approve agenda items for the next regular meeting;
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·
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Coordinate and develop the executive session agenda and chair all executive sessions of non-employee and independent directors;
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·
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Consult with the Executive Chairman and the CEO regarding information to be provided to the directors, providing feedback on its quality, quantity and timeliness;
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·
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Act as the principal liaison between the independent directors, the Executive Chairman and the CEO on sensitive issues and provide comments, suggestions, feedback
and other information to the Executive Chairman and the CEO after executive sessions;
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·
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Confer with the Executive Chairman and the CEO on issues of heightened importance that may involve action by the Board;
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·
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Communicate to the Executive Chairman the results of the Compensation Committees annual performance evaluation of the Executive Chairman;
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21
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·
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Communicate to the Executive Chairman and the CEO the results of the Compensation Committees annual performance evaluation of the CEO;
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·
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Retain, at the Boards direction, outside advisors and consultants who directly report to the Board;
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·
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Work with the Governance Committee, the Executive Chairman and the CEO to identify the Boards compositional needs and criteria for director candidates;
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·
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Be available, as appropriate, for direct communication with major stockholders;
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·
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In the event of the incapacity of the CEO and the Executive Chairman, direct the Secretary of the Company to take all necessary and appropriate action to call a
special meeting of the Board; and
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·
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Perform such other duties as may reasonably be requested by the Board in furtherance of the Boards duties and responsibilities.
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Non-Employee Director Meetings
|
Pursuant to Ambacs Corporate Governance Guidelines, non-employee directors will meet regularly following the Board meetings to discuss, without the presence of management, those items presented at the
previous Board and committee meetings. In addition, if any non-employee directors are not independent, then the independent directors shall schedule an independent director session at least once per year. The Presiding Director leads the
non-employee board sessions and independent director sessions. The non-employee directors held eight meetings in 2008, six of which consisted solely of the independent non-employee directors.
|
Ambacs non-employee directors also hold executive sessions without
management during Committee meetings to address various matters, including the report of the independent auditor, the review of the CEO and the Executive Chairman succession plans, the criteria upon which the performance of the Executive Chairman,
the CEO and other senior managers are assessed, the performance of the Executive Chairman, the CEO against such criteria, the compensation of the Executive Chairman, the CEO, and other relevant matters. These Committee executive sessions are led by
the Chair of the Committee for which the executive session is held.
Changes to By-Laws and Certificate of Incorporation
|
The Board of Directors approved an amendment to the By-Laws of Ambac on October 21, 2008 in order to reflect that the Companys Executive Chairman position become an officer of the Company.
Ambacs current By-Laws, as amended, were attached as Exhibit 3.04 to the Current Report on Form on 8-K filed October 27, 2008.
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22
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Upon recommendation of Ambacs Board of Directors, the Stockholders also approved an amendment to the Amended and Restated Certificate of Incorporation of Ambac on June 20, 2008 increasing the
number of authorized shares of common stock from 350 million to 650 million shares.
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Other Corporate Governance Highlights
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·
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Our practice has always been to have a substantial majority (75%) of non-employee independent directors.
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·
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Since becoming a public company in 1991, only non-employee independent directors have served on our Audit and Risk Assessment, Governance and Compensation
Committees.
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·
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All of the members of the Audit and Risk Assessment Committee meet the NYSE standards for financial literacy.
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·
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Four out of six of our members of the Audit and Risk Assessment Committee qualify as audit committee financial experts as such term is defined in the
applicable SEC regulations. For a list of audit committee financial experts, please see pages 25 and 26 under Audit and Risk Assessment Committee Report.
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·
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Our Corporate Governance Guidelines provide that no director may serve on the board of more than five public companies, including Ambac. The CEO of Ambac may not
serve on the board of more than three public companies, including Ambac.
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·
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Our Audit and Risk Assessment Committee hires, determines the compensation of, and decides the scope of services performed by, our independent auditors. It also has
the authority to retain outside advisors.
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·
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No member of the Audit and Risk Assessment Committee may serve on more than three public companies audit committees, including the Audit and Risk Assessment
Committee of Ambac.
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·
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Our Compensation Committee has the authority to retain independent consultants, and, in fiscal 2008, engaged Johnson Associates, Inc. to assist it. It also
evaluates the performance of the Chief Executive Officer and discusses the evaluation with all non-employee directors in executive session.
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·
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Our Board policy opposes, and the Equity Plan prohibits, the re-pricing of our outstanding stock options. Further, the Board does not, and has not permitted,
backdating of stock options.
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·
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Our Board has adopted a Code of Conduct applicable to all directors, officers and employees that sets forth basic principles to guide their day-to-day activities.
The Code of Conduct addresses, among other things, conflicts of interest, corporate opportunities, confidentiality, fair dealing, protection and proper use of company assets
(including
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23
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computer and telecommunications resources),
media contact and public discussion, compliance with laws and regulations
(including insider trading
laws)
and reporting illegal or unethical behavior. A copy of the Code of Conduct is available at our website:
http://www.ambac.com
. A copy of the Code of Conduct is also available to stockholders free of charge on request to Anne
Gill Kelly, our Corporate Secretary, at 212-208-3355 or at
akelly@ambac.com
.
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·
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Under our Directors Plan, we award only restricted stock units and phantom stock unit awards to directors. We discontinued awards of stock options for directors in
May 2003.
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24
T
HE
A
UDIT
AND
R
ISK
A
SSESSMENT
C
OMMITTEE
R
EPORT
The Audit
and Risk Assessment Committee of Ambac is responsible for providing independent, objective oversight of Ambacs accounting functions and internal controls and risk management. The Audit and Risk Assessment Committee selects the independent
auditors. The Audit and Risk Assessment Committee is currently composed of six independent directors, each of whom is independent as defined under the rules of the NYSE. In accordance with Section 407 of the Sarbanes-Oxley Act of 2002, Ambac
has identified the following four members of the Audit and Risk Assessment Committee as audit committee financial experts: Messrs. Duff, Theobald, Wallace and Ms. Considine.
The Audit and Risk Assessment Committee operates under a written charter
adopted by the Board of Directors. A copy of the charter is available at Ambacs website:
http://www.ambac.com
. The Audit and Risk Assessment Committee regularly reviews its charter to ensure that it is meeting all relevant Audit and
Risk Assessment Committee policy requirements of the SEC, the Public Company Accounting Oversight Board and the NYSE.
Management is responsible for the preparation, presentation and integrity of Ambacs financial statements, accounting and financial reporting
principles and the establishment and effectiveness of internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The independent auditors are responsible for performing an
independent audit of Ambacs consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States), expressing an opinion, based on their audit, as to whether the financial
statements fairly present, in all material respects, the financial position, results of operations and cash flows of Ambac in conformity with generally accepted accounting principles and auditing the effectiveness of internal control over financial
reporting. The Audit and Risk Assessment Committees responsibility is to monitor and oversee these processes. However, none of the members of the Audit and Risk Assessment Committee is professionally engaged in the practice of accounting or
auditing nor are all of our members experts in those fields. The Audit and Risk Assessment Committee relies without independent verification on the information provided to it and on the representations made by management and the independent
auditors.
The Audit and Risk Assessment Committee held eight
meetings during 2008. The meetings were designed, among other things, to facilitate and encourage communication among the Audit and Risk Assessment Committee, management, the internal auditors and Ambacs independent auditors, KPMG LLP, an
independent registered public accounting firm. The Audit and Risk Assessment Committee discussed with Ambacs internal auditors and KPMG LLP the overall scope and plans for their respective audits. The Audit and Risk Assessment Committee met
with the internal auditors and KPMG LLP, with and without management present, to discuss the results of their examinations and their evaluations of Ambacs internal controls.
The Audit and Risk Assessment Committee has reviewed and discussed the audited consolidated financial statements for the
fiscal year ended December 31, 2008 with management, the internal auditors and KPMG LLP. The Audit and Risk Assessment Committee also discussed with management and KPMG LLP the process used to support certifications by Ambacs Chief
Executive Officer and Chief Financial Officer that are required by the SEC and the Sarbanes-Oxley Act of 2002 to accompany Ambacs periodic filings with the SEC.
25
The Audit and Risk Assessment Committee also discussed with KPMG LLP matters required to be discussed with audit committees under auditing standards,
including, among other things, matters related to the conduct of the audit of Ambacs consolidated financial statements and the matters required to be discussed by Statement on Auditing Standards No. 61 (
Communication with Audit
Committees
).
KPMG LLP also provided to us the written
disclosures required by Independence Standards Board Standard No. 1 (
Independence Discussions with Audit Committees
), and the Audit and Risk Assessment Committee discussed with them their independence from Ambac. When determining KPMG
LLPs independence, the Committee considered whether their provision of services to Ambac beyond those rendered in connection with their audit of Ambacs consolidated financial statements and reviews of Ambacs consolidated financial
statements included in its Quarterly Reports on Form 10-Q was compatible with maintaining their independence. The Audit and Risk Assessment Committee also reviewed, among other things, the audit and non-audit services performed by, and the amount of
fees paid for such services to, KPMG LLP. The Audit and Risk Assessment Committee concluded that KPMG LLP, an independent registered public accounting firm, is independent from Ambac and its management.
Based upon the review and discussions referred to above, the Audit and Risk
Assessment Committee recommended to the Board of Directors, and the Board of Directors has approved, that Ambacs audited financial statements be included in Ambacs Annual Report on SEC Form 10-K for the year ended December 31, 2008.
The Audit and Risk Assessment Committee also selected KPMG LLP, an independent registered public accounting firm, as Ambacs independent auditors for 2009.
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The Audit and Risk Assessment Committee
|
|
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Henry D.G. Wallace,
Chairman
Jill M. Considine
Paul R. DeRosa
Philip N. Duff
Thomas C. Theobald
|
March 18, 2009
|
|
Laura S. Unger
|
26
I
NFORMATION
A
BOUT
THE
E
XECUTIVE
O
FFICERS
The Executive Officers
These are the biographies of Ambacs current executive officers, except for Mr. Callen, Ambacs Executive Chairman, and Mr. Wallis,
Ambacs President and Chief Executive Officer, whose biographies are included below at page 68 and 70, respectively under Proposal 1: Elect Eight Directors.
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|
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Douglas C. Renfield-Miller
Age
55
|
|
Executive Vice President
In October 2008,
Mr. Renfield-Miller was named President and CEO of Everspan Financial Guarantee Corp., Ambacs new municipal bond insurer. In July 2006, Mr. Renfield-Miller was named Executive Vice President of Ambac and Ambac Assurance. From January
2004 to July 2006, Mr. Renfield-Miller served Ambac and Ambac Assurance as a Senior Managing Director. He also served as the Chairman and CEO of Ambac Assurance UK Limited, Ambacs international financial guarantee subsidiary, from April
2005 to December 2008. During that period, Mr. Renfield-Miller was responsible for Ambacs international offices encompassing London, Milan, Sydney and Tokyo. Prior to moving to London, Mr. Renfield-Miller worked in New York
overseeing Ambacs Structured Credit, Commercial ABS, Derivatives and Investment Agreement businesses as well as Ambacs operations in the Asia/Pacific Region and the Emerging Markets. Mr. Renfield-Miller joined Ambac and Ambac
Assurance in April 2000 as a Managing Director. Before joining Ambac, Mr. Renfield-Miller was a Managing Director with UBS Principal Finance and Credit Arbitrage group. Mr. Renfield-Miller joined UBS in 1987 and served in various
other management positions in New York and Zurich during his 13-year career, including Head of Structured Finance in the Americas and Global Advisor for Structured Finance.
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Diana Adams
Age 46
|
|
Senior Managing Director
In 2008, Ms. Adams
became a Senior Managing Director with responsibilities for Ambacs Structured Finance and International businesses. In December 2008, Ms. Adams also began serving as the Chairman of Ambac Assurance UK Limited, Ambacs
international financial guarantee subsidiary. Prior to that, Ms. Adams had been Managing Director of Emerging Markets, Structured Insurance and Student Loans. Ms. Adams joined Ambac in 2000 as the head of Emerging Markets following
the winding down of the international joint venture between Ambac and MBIA, where she worked. From 1993-1999, Ms. Adams worked at JP Morgan first in the Capital Markets division and then in the Structured Products division. From
1990-1993 Ms. Adams worked for Mitsubishi Bank in Leveraged and Acquisition Finance. From 1988-1990 Ms. Adams worked at Merrill Lynch in the Investment Banking division.
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27
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Gregg L. Bienstock
Age 44
|
|
Senior Vice President, Chief Administrative Officer and Employment Counsel
Since January 2005, Mr. Bienstock has served as Senior Vice President, Chief Administrative Officer and Employment Counsel of Ambac and Ambac Assurance. From January 1999 to January 2005, Mr. Bienstock
served as Managing Director, Human Resources and Employment Counsel of Ambac and Ambac Assurance. Mr. Bienstock has executive responsibility for Human Resources, Global Marketing, Administration and Technology. Mr. Bienstock served as
First Vice President, Director of Human Resources and Employment Counsel of Ambac and Ambac Assurance from February 1997 to January 1999. Mr. Bienstock joined Ambac from the Bristol Myers-Squibb Corporation, where he served as a Director of
Human Resources from February 1996 to February 1997. From September 1993 to February 1996, Mr. Bienstock was an associate with the New York law firm of Proskauer Rose LLP. Prior to joining Proskauer, from April 1992 to September 1993,
Mr. Bienstock was an Assistant General Counsel for the Mayors Office of Labor Relations for the City of New York.
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Kevin J. Doyle
Age 52
|
|
Senior Vice President and General Counsel
In
January 2005, Mr. Doyle was named Senior Vice President and General Counsel of Ambac and Ambac Assurance. Since January 2000, Mr. Doyle has served as General Counsel of Ambac and Ambac Assurance and Ambacs Chief Legal Officer.
Mr. Doyle also has executive responsibility for internal audit. In January 2000, Mr. Doyle was named Managing Director and General Counsel of Ambac and Ambac Assurance. From January 1996 to January 2000, Mr. Doyle served as the
Managing Director and General Counsel of the Specialized Finance Division of Ambac Assurance. Mr. Doyle served as First Vice President and General Counsel of the Specialized Finance Division of Ambac Assurance from July 1995 to January 1996.
Mr. Doyle joined Ambac Assurance as a Vice President and Assistant General Counsel from the New York law firm LeBoeuf, Lamb, Greene & MacRae in 1991.
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Sean T. Leonard
Age 44
|
|
Senior Vice President and Chief Financial Officer
Since March 2008, Mr. Leonard has served as Senior Vice President and Chief Financial Officer and is also responsible for managing Ambacs Investor and Rating Agency Relations and Fixed Income Investment Management.
Mr. Leonard joined Ambac and Ambac Assurance as Senior Vice President and Chief Financial Officer in June 2005, which included executive responsibility for managing Ambacs Investor and Rating Agency Relations. Mr. Leonard came to
Ambac from PricewaterhouseCoopers LLP, where he was a partner in their Structured Finance Group and Financial Services Group from July 2000 to June 2005. Before July 2000, Mr. Leonard served as a Senior Manager for PricewaterhouseCoopers LLP.
From July 1998 to June 2000, Mr. Leonard also served as a practice fellow at the Financial Accounting Standards Board. In addition, since June 2005, Mr. Leonard has served as Chair of the Finance Committee of the Association of Financial
Guarantors.
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28
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Robert G. Shoback
Age 49
|
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Senior Managing Director
In February 2009,
Mr. Shoback was named Executive Vice President of Everspan. Since January 2004, he has served as a Senior Managing Director of Ambac and Ambac Assurance. Since August 2007, he has been responsible of the all business units in the
Public Finance Division. Since January 2004, he has been responsible for the Public Finance Divisions East Region, the Structured Real Estate group and the Health Care group. He served as a Managing Director in the Public Finance
Division from November 1998 to January 2004. He joined Ambac in November 1998 from Lehman Brothers where he was a Senior Vice President in its Municipal Bond Department where he worked from 1994 through 1998. Prior to Lehman Brothers,
Mr. Shoback worked in the Public Finance Division at Donaldson, Lufkin & Jenrette from 1986 to 1994.
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Timothy J. Stevens
Age 37
|
|
Senior Managing Director
In December 2008,
Mr. Stevens was named a Senior Managing Director of Ambac and Ambac Assurance. Since March 2008, he has been responsible for Ambacs Capital Markets Group which includes the management of Ambacs investment portfolios, the Guaranteed
Investment Contracts business, and the Global Derivatives business as well as the Global Secondary Markets Group. From August 2005 to March 2008, Mr. Stevens served as the head of the Global Secondary Markets Group, and from January 2007 until
March 2008 he also served as head of the Credit Risk Transfer Group. Prior to this role, Mr. Stevens ran Ambacs Guaranteed Investment Contracts (GIC) business from June 2003 to August 2005, where he was responsible for the management of
the GIC portfolio. From October 2000 to June 2003, Mr. Stevens was a member of Ambacs Structured Credit Group where he underwrote and executed credit derivative contracts. From 1995 to October of 2000, Mr. Stevens served in various
roles in Ambacs Financial Control Department, including as business unit Financial Controller for the Structured Credit and the GIC businesses. Mr. Stevens worked in the Audit Services division of Deloitte & Touche before joining
Ambac in 1995.
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29
C
OMPENSATION
D
ISCUSSION
AND
A
NALYSIS
Our primary compensation objective for 2008 was to provide a fair level of
compensation to our executives while acknowledging the negative consequences to Ambac of past decisions and the impact of the global economic crisis on our business. With these objectives in mind, the Committee considered the efforts Ambac has made
to mitigate its losses, the need to continue to work towards stabilizing Ambac, and the critical importance of retaining and motivating our executives and employees for our future. The Committees compensation decisions also considered the
significant level of actual stock ownership by the executive officers.
Key
Decisions in 2008
2008 was marked by continued
challenges and questions regarding Ambacs viability. The organization experienced significant change in its management team and reported net loss of $5.6 billion, driven primarily by a mark-to-market loss of $8.2 billion. Also included in
these results are losses and impairments of $5.9 billion related primarily to Ambacs exposure to the currently troubled residential real estate sector, primarily through securities we insured in the mortgage-backed and collateralized debt
obligation sectors. The magnitude of the losses was aggravated by the severe global economic crisis that continues. While we successfully raised capital in March 2008 to support our enterprise, our ability to generate new business was impaired as a
result of our being downgraded by the rating agencies. As such, we did not meet our financial objectives.
In view of these circumstances, and consistent with the compensation principles discussed below, we have taken the following steps relating to
compensation.
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·
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Following the resignation of our previous Chief Executive Officer in January 2008, Michael Callen was appointed interim Chief Executive Officer and served in that
capacity through October 2008. Mr. Callen has retained the title of Executive Chairman and currently remains an executive officer of the Corporation. We paid Mr. Callen a special bonus for his assumption of these roles and his significant
time commitment, leadership, guidance and direction during a time of great uncertainty for the Company.
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·
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In February 2008, David Wallis was named Chief Risk Officer. Given the paramount importance of long-term risk control to Ambac and our desire to deemphasize
short-term incentive compensation, the Compensation Committee deemed it appropriate to increase Mr. Walliss base salary, decrease his bonus opportunity and award him a front-loaded grant of stock options and restricted stock
units (
RSUs
). In October, we named Mr. Wallis as our Chief Executive Officer. Mr. Walliss bonus for 2008 was based on his service as Chief Risk Officer from February 2008 through October 2008 and for his
time as Chief Executive Officer since October 2008.
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·
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We paid annual cash bonuses for 2008 to the named executive officers (
NEOs
) who are continuing service with Ambac for 2009. We view each
of the remaining NEOs as critical to our efforts to improve stockholder value over the long-term. The Committee determined that paying discretionary cash bonuses to these NEOs was advisable in order to provide them with a total compensation level
that would acknowledge their efforts and loyalty during 2008 and successfully retain and motivate them for the future. Total compensation levels for the NEOs would have
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30
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otherwise been insufficient, in the Committees judgment, because the NEOs did not receive any bonus payout under the Executive Incentive Plan as a
result of Ambac not having reached the pre-established performance thresholds. On average, the incentive compensation for our executive officers paid in 2008 decreased by 60%, compared to 2007.
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|
·
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John W. Uhlein, III, who served as an Executive Vice President, resigned effective February 2009. Payments to Mr. Uhlein reflect what are required by his
separation agreement.
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|
·
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William T. McKinnon retired on February 8, 2008. Payments to Mr. McKinnon were made pursuant to his employment agreement, entered into in January 2007.
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·
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With the exception of equity awards made to Mr. Wallis when he assumed the position of Chief Risk Officer and to Mr. Callen in lieu of the award he would
have received under our plan for non-employee directors had he not accepted appointment as our interim Chief Executive Officer, we did not award stock options or RSUs in respect of 2008 to any of our executive officers. Ambacs compensation
structure for executives has historically emphasized a significant amount of equity compensation (
approximately 50% of total incentive compensation
); however, given the limited number of shares available under our Equity Plan and the low
current stock price, we did not think it was in our stockholders best interests to grant additional shares to our executive officers.
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·
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Effective October 2008 we suspended our stock ownership targets, which are based on a level of ownership of Ambac stock as a multiple of the officers total
cash compensation, due to the precipitous fall in Ambacs stock price. Nevertheless, each of our NEOs continues to hold a significant number of shares and outstanding equity awards.
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·
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We did not increase the base salaries of our NEOs for 2008, except in the case of an increase for Mr. Wallis when he assumed the position of Chief Risk Officer
in February 2008. In 2009, we increased the rate of base salary for four of our NEOs (
Douglas C. Renfield-Miller, Sean T. Leonard, Kevin Doyle and Robert Shoback
) to address the market for their roles and to reflect our new compensation
structure discussed below. Going forward, our compensation programs will have less emphasis on variable incentive compensation and more emphasis on payments based on individual performance, accountability and contributions, retention and motivation.
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·
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We have continued our practice of offering our NEOs health, welfare and similar benefit programs on the same basis that we make these programs available to our
employees generally.
|
The remaining portions
of this CD&A discuss our compensation program for NEOs and the rationale under our program for our 2008 pay decisions and the change to our compensation structure and framework for 2009.
Compensation Philosophy for 2008
Generally, we seek to provide a competitive total compensation package that
provides a fair level of compensation to all employees, rewards those whose performance exceeds their responsibilities and objectives and recognizes the critical element of accountability where performance does not meet the objectives. However, in
February 2008 in an effort to promote retention, the Committee provided most
31
employees a minimum 2008 performance year bonus guarantee of 90% of the bonus they received for the 2007 performance year.
For our NEOs, there was no bonus guarantee, and we continued to consider a
total compensation approach in setting pay levels. Our annual compensation decisions focus on the sum of an NEOs base salary, annual performance bonus and long-term equity incentive awards. Thus, our decisions with respect to any
particular element of an NEOs compensation take into account how a change in that element will affect the officers total compensation package. All of our executive officers experienced a decline in incentive compensation, and the group
averaged a reduction of 60% in incentive compensation when compared to the 2007 performance year. The ultimate goal of the compensation framework was to create an incentive for key executive officers who have been, and will continue to be,
instrumental to the implementation of Ambacs corporate strategy.
Compensation Philosophy for 2009
For
2009, the Committee approved the implementation of a new Company-wide compensation framework that deemphasizes cash bonuses, pays base salaries based on a comparison with a broader group of companies (
not only Wall Street firms
)
and offers limited but variable incentive based opportunities driven by individually defined performance metrics aligned with our organizational objectives. The Compensation Committee studied this revised structure for much of 2008. The Committee
concluded that a compensation construct with less emphasis on short-term incentive compensation is consistent with emerging views of the market and our regulators concerning appropriate compensation policy and addresses the Committees concern
that the opportunity for larger incentive bonus payments may promote riskier behavior.
Our new compensation model has several objectives: (i) adjust compensation relative to the market and new roles; (ii) drive cultural transformation by requiring true differentiation for any individual bonus
payments and managerial accountability for the same; (iii) deliver a message that the behavior of our employees is not dictated by short-term incentive compensation; (iv) support our efforts to restore confidence and rebuild activities
during the next 12-18 months including avoiding potential unwanted attrition; and (v) attract and retain key personnel by offering a compensation structure uncommon to our industry and the broader financial services sector.
Elements of Executive Compensation for 2008
The primary elements of compensation provided to our executives are base
salary, an annual performance bonus and, historically, long-term incentive awards in the form of stock options and restricted stock units.
Under the construct for 2008, at least 80% of an executive officers direct compensation opportunity (
salary plus bonus plus long-term incentive
awards
) consisted of the opportunity for bonus and long-term incentive awards. For the reasons noted above, in respect of 2008, we did not award long-term incentive awards following year-end to any of our executives. The Committee determined the
NEOs total compensation based on Ambacs performance, the performance and accomplishments of the group of functions for which the executive is responsible and the executives performance, and the special emphasis in 2008 on
retention.
32
Set forth below is a discussion of each element of NEO compensation, why we pay each element and how each element fits into our overall compensation
philosophy.
(I) Base Salaries
NEOs generally have historically received a relatively small portion of their
overall compensation as base salary, although the percentage of direct compensation for 2008 was generally higher than for prior years in view of our decision not to make year-end equity awards. For 2008, the percentages of direct compensation
(
salary plus bonus plus long-term incentive awards
) represented by base salary ranged from 21% to 46% for our NEOs. Base salaries provide our executives with a minimum level of fixed compensation and for 2008 were generally below the median
base salaries paid to executives in corresponding positions by competitors in the Peer Group discussed below.
Consistent with our new approach to compensation, for 2009, the Committee increased base salaries for the executives. These increases were the result of
the Committees revised compensation framework and associated objectives as discussed on page 32 of this CD&A. The Committee reviewed the total compensation for our executives, assessed the current market for the scope of responsibilities
of each executive (
including promotions
), and considered the results achieved by the executive and his or her future potential and importance to Ambacs future. The Committee also considered the recommendations and opinions of the
Chairman, the Chief Executive Officer, the Chief Administrative Officer and our compensation consultant Alan Johnson of Johnson Associates.
(II) Annual Incentive CompensationBonus and Long-Term Incentive Awards
Annual Bonus
Generally, the role of the annual bonus is to incent our executives, including our NEOs, and to reward them or to hold them accountable for performance
against our annual objectives.
The annual bonus is a cash
incentive that is typically paid during the first quarter following the year of performance. Historically, the annual bonus has represented a significant portion of an NEOs annual cash and total compensation, and we continued that practice for
2008. For 2008, annual bonus accounted for between 23 % and 78 % of each NEOs annual cash (
salary plus bonus
), and direct compensation (
salary plus bonus plus long-term incentive awards
). All bonuses paid to executive
officers for 2008 were determined in the discretion of the Compensation Committee and did not qualify as performance-based compensation under the Executive Incentive Plan for the reasons discussed below.
Annual Long-Term Incentive Awards
In years past, we have provided long-term incentive awards to our NEOs, in
the form of stock options and RSUs. In respect of 2008, apart from the front-loaded equity grant we made to Mr. Wallis when he was named Chief Risk Officer and the award to Mr. Callen in lieu of his non-employee director equity grant discussed
in more detail below, the Committee did not award any long-term incentive awards given the limited number of shares available under our Equity
33
Plan and the low current stock price. Nevertheless, each of our NEOs holds a significant number of shares as well as outstanding equity awards. The level of
continued ownership and outstanding, unvested long-term incentive awards from prior years provides continued alignment of interest with our stockholders and the necessary focus of our executives on the reestablishment of the franchise.
Forfeiture, Recoupment and Notice Requirements
We maintain forfeiture and recoupment provisions relating to outstanding
stock option and RSU awards. Under these provisions, NEOs who violate a non-competition agreement will forfeit any outstanding awards as of the date the violation is discovered and are required to return any gains realized during the six months
before and after the executives employment terminated. We believe that these provisions, which we apply to all of our officers generally, help ensure that our executives act in the best interest of Ambac and our stockholders.
Ambac also requires executive officers to agree to provide a minimum notice
prior to departure as a condition for the receipt of stock option awards. During the notice period, the executive remains employed by Ambac (
although we may relieve the executive from performing employment duties during the notice period
) and
is prohibited from working or performing services for any employer other than Ambac.
Retirement
Generally, upon
retirement at age 55 or disability, the stock options and RSUs held by an employee
(including an NEO)
who has been employed with Ambac for at least three years, will become fully vested
(and, in the case of stock options, exercisable)
,
unless otherwise provided in an award agreement. Of our NEOs, Mr. Renfield-Miller was retirement eligible during 2008. The Compensation Committee believes that this policy appropriately rewards those employees who have served Ambac loyally
and, based on the advice of its compensation consultant, that it is market practice in our industry.
Backdating and Repricing Prohibitions
The Compensation Committee does not and has not permitted backdating or repricing of stock options. Our 1997 Equity Plan explicitly forbids stock option
repricing.
(III) Other Benefits
Our executives participate in a retirement plan, health plans, and other
voluntary benefit plans that we make available to all Ambac employees generally. We consider these benefits to be market competitive and consistent with local market practices. These benefits include matching certain employee contributions to our
401(k) savings plan and providing all eligible employees a 3% profit sharing contribution and a 3% supplemental profit sharing contribution (
based on the employees salary
), each of which is allocated as directed by the employee. As of
December 31, 2008, we terminated our nonqualified savings incentive plan, to which we formerly credited amounts we were precluded from contributing to the 401(k) plan because of limitations under the Internal Revenue Code.
34
We terminated our tax-qualified defined benefit pension plan as of December 31, 2006. All of our NEOs received a lump sum distribution of their
accumulated benefit value under the plan during 2007 on the same terms that applied to all other employees who elected a lump sum distribution. By terminating our tax-qualified defined benefit plan, we froze benefit accruals under two related
nonqualified defined benefit plans, with the result that our NEOs stopped accruing benefits under the nonqualified plans as of December 31, 2006. All of our NEOs received a lump sum distribution of their accumulated benefit value under these
plans in March 2008.
We provide officers assigned to work
abroad certain expatriate benefits to ensure that they are not put at a disadvantage by accepting assignment to a foreign country and to tax equalize any such payments. We do not provide any other perquisites to our executives, except for certain
tax equalization and expatriate benefits that were provided during 2008 to Messrs. Callen and Wallis, as described below.
(IV) Change in Control Agreements
We have entered into management retention agreements (MRAs) with our executive officers to provide for certain payments and other benefits if
they are terminated within three years following a change in control of Ambac. The purpose of these agreements is to avoid unwanted management turnover in the event of a potential change in control and to ensure that the executive officers will
remain focused on the interests of our stockholders notwithstanding the personal uncertainties that a change in control may occasion. The Committee has reviewed the terms of the MRAs and considers the agreement to serve a useful function and
establish severance at an appropriate level.
Our management
retention agreements are double trigger agreements under which benefits (
other than the acceleration of vesting of equity awards
) will be provided only if there is both (i) a change in control and (ii) a qualifying
termination of the executive officers employment within three years of the change in control. The specific provisions of these agreements are discussed on pages 62 to 64 in the Proxy Statement.
Comparison Group and Benchmarking
In setting pay for our NEOs, we undertake a series of analytical steps and
processes to ensure we are market competitive and paying our executives appropriately. We conduct a peer group analysis, consult with an outside, independent executive compensation expert and evaluate and consider market conditions.
For 2008, we reviewed historical compensation of the Peer Group (as defined
below) but did not afford this review as much weight as we have in past years, given the markedly changed environment over the course of 2008. Our comparison included the total compensation levels (
base salary, annual cash bonus and
equity awards
) of our NEOs, as well as each component of total compensation, of a competitor/peer group of companies consisting of our competitors in the financial guarantee insurance industry and other financial services firms employing
executives with similar skill sets: MBIA, Financial Security Assurance, XL Capital, Assured Guaranty, PMI Group, Syncora, Everest RE, Max Re, Moodys, MGIC and Radian (the
Peer Group
). We obtain data for the Peer Group
from a number of sources, including proxy statements, public information available from regulatory agencies, publicly available surveys and proprietary market information from our compensation consulting firm.
35
The performance of virtually all members of the Peer Group was significantly affected by general economic conditions during 2008, and this resulted in
marked variation in data across the group. Thus, we did not utilize the Peer Group as a primary basis for our compensation decisions and instead used the data as an indication of current compensation practices.
For 2008, we also
reviewed, with the assistance of our compensation consultant, the publicly disclosed 2007 compensation information of twenty-one of the 258 firms accepting government capital under the Troubled Assets Relief Program (
TARP
)
as of January 15, 2009 (
Goldman Sachs, JP Morgan, American Express, Morgan Stanley, Bank of America, Citigroup, Capital One, Wells Fargo, Northern Trust Co., CIT Group, US Bancorp, KeyCorp, SunTrust, Marshall & Ilsely, Associated
Banc Corp., Huntington Bancshares, M&T Bank Corp., Wilmington Trust Co., Zions, Boston Private Financial Holdings, Provident Bankshares
). Our independent consultant chose these firms because they are visible, significant financial firms that
received significant TARP funding. The majority of the other firms on the TARP recipient list are less known and generally received smaller amounts of TARP funding. While Ambac is not receiving government capital or support, the Committee viewed
this information as relevant to its considerations as a general indication of compensation practice in our market. The Committee did not target compensation of Ambac executives at any specific level relative to these twenty-one companies. However,
the Committee considered that the comparative data, which revealed that Ambac total compensation was between the 25
th
and 50
th
percentiles of this group, supported a conclusion that our approach to 2008 was generally consistent with prior benchmarking of executive and professional
compensation relative to the Peer Group.
Role of Management
For decisions relating to 2008 bonus and long-term equity awards, our
Compensation Committee also considered the input of our Executive Chairman (
Mr. Callen
) and our Chief Executive Officer (
Mr. Wallis
). The Committee reviewed their recommendations with the Committees compensation consultant and
considered the recommendations in executive session. The Committee also considered all relevant performance factors for each executive and attached considerable weight to the importance of retention.
Role of Compensation Consultant
Our Compensation Committee has sole authority to retain, at Ambacs
expense, and to terminate the services of a compensation consultant. Since 1999, the Committee has engaged Alan Johnson, a Managing Director of Johnson Associates, to assist it with benchmarking and compensation analyses, as well as to provide
consulting on executive and non-executive compensation practices. Mr. Johnson provides our Compensation Committee with insight relative to industry best practices, executive compensation levels and policies of Ambacs key competitors and
others in the financial services industry and a review of the impact of competition for talent.
For 2008, Mr. Johnson provided the Committee with Peer Group data, compensation data with
regard to companies accepting government capital, updates as to market conditions for 2008 performance year and forecast for 2009 and assisted in their interpretation and analysis. He provided an assessment of the competitive environment in terms of
actual and projected pay in the financial services and financial guaranty sectors as well as a forecast with regard to headcount in these sectors. Mr. Johnson advised the Compensation Committee that Ambacs total compensation level was
generally between the 25
th
percentile and the median of relevant comparator groups.
36
Mr. Johnson reviewed Ambacs compensation against the above noted information and included in his assessment the effect that the historical
skewing of compensation towards equity-based compensation, our stock ownership requirements and the actual stock holdings of Ambacs executive officers and Managing Directors would have on retention and compensation for performance year 2008.
Mr. Johnson recommended an increase in the percentage of cash compensation we pay our NEOs relative to the other components of their total compensation to achieve a more balanced mix.
Mr. Johnson also assisted the Committee in conducting an objective
assessment of its pay and pay practices, and provided feedback to the Senior Vice President, Chief Administrative Officer and Employment Counsel and the Committee regarding the new compensation structure for 2009 (see page 32). This included his
assessment of the compensation framework in light of the market environment, the need to deemphasize compensation components that can be viewed as encouraging excessive risk taking and Ambacs desire to recalibrate the compensation for
positions within the Company. Mr. Johnson was made aware of the desire to depart from the Wall Street mentality of artificially low base salaries with significant short-term incentive potential and the mandate to drive a cultural
transformation requiring true differentiation based upon performance against key objectives and metrics for incentive awards.
From time to time, Johnson Associates performs broader compensation analyses and/or surveys for Ambac and provides consultation regarding the structure of
Ambacs compensation plans. Apart from these services, Mr. Johnson and Johnson Associates do not provide any other services for Ambac or any of its subsidiaries. The Committee is aware of and approves all services that Johnson and
Associates performs for Ambac.
Executive Incentive Plan
The 1997 Executive Incentive Plan (the
EIP
)
provides the framework for deductibility of NEO compensation in excess of $1 million. Pursuant to the EIP, at the beginning of each year, our Compensation Committee establishes a performance-based formula for calculating the maximum incentive
compensation (
payable in cash and/or equity awards
) payable under the EIP for that calendar year to each of our named executive officers and the other participants in the EIP. Under the terms of the EIP, this maximum amount may not exceed the
lesser of (a) $5 million or (b) the amount derived from the incentive compensation formula established at the beginning of the relevant year. The performance formula may be based on any one, or any combination, of the following performance
categories: return on equity; core/operating earnings growth; total return to stockholders; expense management; risk management; market position/new business production; industry leadership/image building; new products/initiatives; and
organizational development/corporate culture.
37
In early 2008, the Compensation Committee selected core earnings as an appropriate measure for determining incentive compensation under the EIP because
the Committee considered it an important measure of Ambacs performance to a wide range of constituents. The ranges of compensation for the NEOs and executive officers was set based upon the Committees review of the 2008 forecast and its
desire to pay reasonable incentive compensation.
The formula
for determining incentive compensation for 2008 was:
|
|
|
|
Year
|
|
Core
Earnings
Estimate
|
2007
|
|
-$
|
102,000
|
Estimated 2008
|
|
-$
|
80,000
|
Core Earnings Base Level for
2008 162(m) Formula
|
|
-$
|
300,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Funding (Difference
Between Core Earnings Result and
-$300,000 X Individual Funding %;
Max of $5MM)
|
|
|
|
|
Projected
162(m)
Formula
|
|
|
Core Earnings Scenarios
|
Name
|
|
Market Match
|
|
Individual
Funding
%
|
|
|
-$190,000
|
|
-$80,000
|
|
$0
|
|
$100,000
|
Callen,
Michael
|
|
CEO
|
|
2.0
|
%
|
|
$
|
2,200
|
|
$
|
4,400
|
|
$
|
5,000
|
|
$
|
5,000
|
Renfield-Miller,
Douglas
|
|
Head of International
|
|
1.5
|
%
|
|
$
|
1,650
|
|
$
|
3,300
|
|
$
|
4,500
|
|
$
|
5,000
|
Leonard,
Sean
|
|
Chief Financial Officer
|
|
1.5
|
%
|
|
$
|
1,650
|
|
$
|
3,300
|
|
$
|
4,500
|
|
$
|
5,000
|
Uhlein,
John
|
|
Head of Structuring
|
|
1.5
|
%
|
|
$
|
1,650
|
|
$
|
3,300
|
|
$
|
4,500
|
|
$
|
5,000
|
Wallis,
David
|
|
Chief Risk Officer
|
|
1.5
|
%
|
|
$
|
1,650
|
|
$
|
3,300
|
|
$
|
4,500
|
|
$
|
5,000
|
Doyle,
Kevin
|
|
General Counsel
|
|
1.0
|
%
|
|
$
|
1,100
|
|
$
|
2,200
|
|
$
|
3,000
|
|
$
|
4,000
|
Shoback,
Robert
|
|
Head of Public Finance, Healthcare, and Real Estate
|
|
1.0
|
%
|
|
$
|
1,100
|
|
$
|
2,200
|
|
$
|
3,000
|
|
$
|
4,000
|
Total
|
|
|
|
10.0
|
%
|
|
$
|
11,000
|
|
$
|
22,000
|
|
$
|
29,000
|
|
$
|
33,000
|
For 2008, Ambacs
core earnings were ($5,868,965,000). Accordingly, the EIP formula did not authorize any payment of 2008 incentive compensation that, if in excess of $1 million, would qualify as performance based and a deductible expense.
Looking back on 2008, the Committee believes that, given the unpredictable
environment of 2008 and the unforeseen responsibilities and activities required of our executive team and all employees, core earnings, as the primary factor for determining the payment of bonuses, proved not to be the appropriate measure of
performance on which to base compensation for 2008.
38
Compensation of Ambacs Named Executive Officers for 2008
After considering the unpredictable events and requirements of 2008, our retention needs and historical pay practices, our performance for 2008 and market
conditions impacting competitive pay, the Compensation Committee established base salary and an annual cash bonus for each of our NEOs and decided not to award long-term incentive awards to our executive officers. The Committee, in determining
executive pay, also considered the recommendations of the Chairman and Chief Executive Officer when determining pay for the other executives.
The Committee reviewed and evaluated Ambacs business and market conditions which were impacted by the global economic environment and the financial
guaranty industry in 2008 when determining the compensation of the executive officers. Market conditions that impacted Ambac during 2008 included (i) significant deterioration in the housing market that directly impacted our mortgage-related
insured exposures, (ii) a decline in asset valuations across all sectors that contributed to a significant reduction in the fair value of our derivative contracts, (iii) rating agency downgrades which triggered collateralization
requirements in our Financial Services businesses, and (iv) an overall freezing of the credit markets which impacted financial flexibility.
(I) Base Salaries
The data relating to the Peer Group supported an increase in base salaries for 2008 but the Committee concluded it was not appropriate to implement salary
increases at that time. The 2008 base salary for each of the NEOs is reported in the Summary Compensation Table elsewhere in this Proxy Statement.
For 2009, the Committee implemented a new compensation structure that recalibrated (i) base salaries at a higher level and
(ii) incentive-based compensation at a lesser, yet more variable level as represented by a wider range of outcomes based upon objectives and metrics for each NEO. The new construct applies across Ambac and allowed the Committee to (i)
recalibrate compensation relative to the market and new roles, (ii) drive critically important cultural transformation, and (iii) provide a level of certainty to our staff with regard to compensation allowing them to focus on the critical
task of moving Ambac forward and discouraging behavior that may not be supportive of the long-term interest of Ambac.
(II) Total Annual Incentive Compensation
At Ambac, total annual incentive compensation is comprised of the annual bonus and long-term incentive compensation (
restricted stock units and stock
options
). In setting the amount of an executives total annual incentive compensation for 2008, the Committee considered Ambacs performance, the performance of the executive officer, and the performance of the executives
division or areas of responsibility. The Committee also considered the importance of retention, the historical weight accorded to equity-based compensation, the stock ownership of our executive officers, the recommendations of the Executive
Chairman, the Chief Executive Officer, and the comparative data and information presented by Johnson Associates.
As noted above, for 2008, the Executive Chairman, the Chief Executive Officer and other NEOs were not eligible to receive any incentive compensation under
the EIP based on the formula
39
described in the chart above, as Ambacs core earnings for 2008 did not reach the threshold required for a payout under the EIP. The Compensation
Committee determined that Ambacs overall economic performance and losses in 2008 were not satisfactory. The continued impact of the global credit crisis and Ambacs participation in certain transactions in the structured credit sector led
to a second year of record losses and further impacted the value of the franchise. On an aggregate basis, for 2008, the total annual incentive compensation (
bonus plus long-term incentive award
) for our executive officers declined 60%.
Named Executive Officer Compensation
In determining each NEOs compensation, the Committee considered the
performance of Ambac but also afforded significant weight to the dedication, effort and commitment of the executive team and all employees that allowed Ambac to raise capital, commute transactions, respond to regulatory and rating agency matters,
devise a business plan for a municipal bond insurance franchise and continue to monitor and remediate our book of business while also exploring ways to reinvent the franchise.
In this current economic climate, the Committee also considered the critical importance of retaining executives as we seek
to implement our business plan. In addition, the Committee recognized that the compensation of our executives has historically been comprised of a meaningful amount of equity-based compensation, that executive officers were subject to stringent
stock ownership requirements, and that the steep decline in our stock price since 2007 has had severe negative impact on the value of our executives stock holdings and their outstanding restricted stock units and stock options.
In determining 2008 incentive compensation levels, the Committee took note of
each NEOs respective contribution to our performance outlined above and reviewed and analyzed their individual performance as follows:
Michael Callen, Interim Chief Executive Officer
Mr. Callen assumed the role of interim Chief Executive Officer (
CEO
) following our former CEOs unanticipated
retirement from Ambac on January 16, 2008. For 2008, Mr. Callen received base salary at an annual rate of $650,000, which was the same annual salary we paid his predecessor. The Committee considered the fact that Mr. Callen was,
without notice, put into the interim CEO role, emerged from retirement and changed his residence and was charged with leading Ambac in exceedingly difficult times. The Committee determined it was appropriate to reward Mr. Callen for his
stewardship, commitment and exceptional effort in leading and retaining the team and beginning the process of driving us towards a new beginning. Moreover, the Committee took into consideration the fact that the interim appointment lasted longer
than anticipated due to the extended search process for a new chief executive officer. Based on these considerations, the Committee awarded Mr. Callen an annual cash bonus of $975,000, which represented 150% of his rate of annual salary as CEO.
The Committee awarded Mr. Callen an equity award of
restricted stock units valued at $100,000 on June 3, 2008, the date of Ambacs 2008 Annual Meeting of Stockholders. This award was in lieu of his non-employee directors annual equity award for which he was ineligible while serving
40
as our Interim President and CEO. Mr. Callen is also subject to a tax equalization arrangement in connection with his presence in the State of New York
for the time he served as our Interim President and CEO and while he continues as our Executive Chairman. This arrangement is intended to cover the taxes Mr. Callen is subject to as a New York taxpayer that are over and above what his tax
position would be in his home state of Maryland. We have offered this benefit to Mr. Callen in order to eliminate any financial detriment to him from his assignment of duties in New York.
David Wallis, Chief Executive Officer
Mr. Wallis was named Ambacs new Chief Risk Officer in February and
in that capacity was responsible for assessing and delivering a new risk structure and perspective for Ambac. He was instrumental in our capital raise, managing our portfolio, pursuing remediation strategies and commuting several transactions that
reduced outstanding Collateralized Debt Obligations of Asset Backed Securities (CDO of ABS) exposures by $5.0 billion and generating much needed capital. In October 2008, Mr. Wallis was named Chief Executive Officer and charged with leading the
organization forward. The Committee found the 2008 performance of Mr. Wallis as CRO and then CEO to be exceptional.
Upon Mr. Wallis promotion to Chief Risk Officer, his base salary was increased from $300,000 to $1 million dollars and he was awarded stock
options and restricted stock units with a combined grant date fair value (
determined under applicable accounting standards
) of $3.375 million with a five-year cliff vest. The stock option and restricted stock unit award represents the
front-loaded value of one-half the projected annual grant over a five year period. The Compensation Committee reviewed market information provided by Johnson Associates and weighed other Firm considerations when approving the compensation package
for Mr. Wallis. The structure was deemed an appropriate way to ensure that the Chief Risk Officer remained independent, risk averse and is focused on the long-term viability of the enterprise. The Committee awarded Mr. Wallis a cash bonus
of $500,000 and no long-term incentive compensation. The Committee determined that $500,000 was an appropriate bonus as it equaled one-half the base salary, reflecting the Committees goal of deemphasizing short-term incentive compensation
while rewarding Mr. Wallis for his performance in 2008.
For 2008, Mr. Wallis, who was an expatriate, was provided with an expatriate package that included tax equalization, housing, goods and services, tuition and home leave allowances and tax preparation assistance. The allowances and
services provided to Mr. Wallis are the same allowances and services we make available to all expatriate Ambac employees. The expatriate allowances for Mr. Wallis, other than tax preparation assistance, were discontinued after
Mr. Wallis sold his primary residence in the United Kingdom. The Compensation Committee approved a tax equalization payment upon Mr. Wallis sale of his UK residence. This was in recognition of the additional tax liability that
Mr. Wallis faces as a result of being resident in the United States.
Sean T.
Leonard, Chief Financial Officer
The Committee found
the 2008 performance of Mr. Leonard, Ambacs CFO, to be exceptional. Mr. Leonard, who serves as a key member of Ambacs senior management team, was
41
instrumental in devising various capital alternatives and ultimately led the team responsible for structuring, negotiating and executing Ambacs $1.5
billion capital raise in early 2008, when Ambac was facing enormous pressure in the capital markets. Moreover, during this period of crises, Mr. Leonard effectively communicated with Ambacs regulators, rating agencies, investors and other
constituents which have proven critical as we stabilize our franchise and move forward. In addition, he was an integral part of several commutations. Mr. Leonard and his team are at the forefront of all accounting issues that may impact
Ambacs business, providing sound advice and direction to ensure Ambacs financial statements are in line with GAAP, FASB and all other accounting and regulatory requirements. In setting Mr. Leonards compensation, the Committee
considered not only his outstanding performance in 2008, but also the critical role he continues to play in Ambacs current phase of strategic development.
The Committee awarded Mr. Leonard a cash bonus of $950,000 but did not award any long-term incentive compensation. The Committee believed that
Mr. Leonards incentive compensation appropriately reflected his individual performance, his groups contribution and the Committees desire to retain his services for the future while recognizing the performance of Ambac. The
Committee determined that the cash bonus was appropriate after considering Mr. Leonards compensation relative to other CFOs in the Peer Group, relative to other Ambac executive officers and employees and in consideration of his relative
accomplishments and contributions.
Kevin Doyle, Senior Vice President and General
Counsel
The Committee found the 2008 performance of
Mr. Doyle, Ambacs General Counsel, to be exceptional. Mr. Doyle played a critical role in our capital raise. Mr. Doyle is also the primary interface with our insurance regulators, including the Office of the Commissioner of the
State of Wisconsin. In addition to managing our relationships with the insurance regulators through the stress experienced by Ambac Assurance, he played a critical role in obtaining the Wisconsin regulators consent with respect to the
intercompany loans between Ambac Assurance and our financial services businesses, thus allowing us to avert significant liquidity issues. He has also played a significant role in our efforts to reactivate Everspan Financial Guarantee Corp., working
with various constituents to structure a stand-alone company that is removed from the issues confronting Ambac Assurance, and to obtain the insurance regulators consent to the capitalization of Everspan via an investment by Ambac Assurance. In
addition, Mr. Doyle has managed our litigation efforts where, as plaintiff, Ambac is seeking to recover damages and mitigate loss in our insured portfolio.
The Committee awarded Mr. Doyle a cash bonus of $950,000 and did not award any long-term incentive compensation. The Committee believed that
Mr. Doyles incentive compensation appropriately reflected his individual performance, his groups contribution and the Committees desire to retain his services for the future while recognizing the performance of Ambac. The
Committee also considered Mr. Doyles cash and total compensation relative to other General Counsels with similar responsibilities in the Peer Group, to other Ambac executive officers and employees and in consideration of his
relative accomplishments and contributions.
Douglas Renfield-Miller, Executive
Vice President
The Committee found
Mr. Renfield-Millers performance to have met their changed expectations for 2008. Mr. Renfield-Miller, the CEO designate of Ambacs municipal bond subsidiary,
42
Everspan, was charged with creating and implementing a business plan for Everspan. He successfully led a team to create the necessary infrastructure,
assembled a team, including a Board of Directors, to move this critical initiative forward and is working to obtain the support of our regulatory and rating agency constituents.
The Committee awarded Mr. Renfield-Miller a cash bonus of $550,000 and did not award any long-term incentive
compensation. The Committee believed that Mr. Renfield-Millers incentive compensation is appropriate in light of the scope of his role, the realties facing Ambac and the desire to retain his services as CEO of Everspan. The Committee
considered the unique scope of Mr. Renfield-Millers responsibilities and the decline in his cash and overall incentive compensation.
Robert Shoback, Senior Managing Director
The Committee found Mr. Shobacks performance to have met their expectations for 2008. The scope of Mr. Shobacks responsibilities for
2008 extended to include his support during the capital raise and his role in the creation of Everspan. In addition, Mr. Shoback continued to manage our Public Finance team and worked closely with clients and issuers to address market
dislocation associated with deals previously insured by Ambac.
The Committee awarded Mr. Shoback a cash bonus of $350,000 and did not award any long-term incentive compensation. The Committee believed that Mr. Shobacks incentive compensation is appropriate in light of the scope of his
role, the realties facing Ambac and the desire to retain his services in a critical role with Everspan.
Robert J. Genader, Former Chief Executive Officer
Mr. Genader announced his retirement from Ambac on January 13, 2008, effective January 16, 2008. Mr. Genader was paid his base salary through his retirement date and was not awarded any bonus or
long-term incentive compensation. Mr. Genader did not receive any severance or other retirement package. Upon retirement, Mr. Genaders unvested equity awards vested in accordance with the terms and conditions of the underlying award
agreements as applicable to all employees.
John W. Uhlein, III, Executive Vice
President
Mr. Uhlein served as Executive Vice
President and supported our efforts to commute and remediate certain transactions. He also was involved in the review of certain potential new business initiatives.
The Committee approved an agreement at the time of Mr. Uhleins resignation that provided the Corporation with
transition and consulting services, a release of all claims, confidentiality restrictions and non-competition terms. In return, the Committee approved a cash bonus for 2008 for Mr. Uhlein in the amount of $750,000 and salary continuation until
February 1, 2009 (the effective date of his resignation). For further details of Mr. Uhleins agreement, please see Agreement with John W. Uhlein, III on page 66 below.
43
William T. McKinnon, Former Chief Risk Officer
Mr. McKinnon retired from Ambac on February 8, 2008. Mr. McKinnon served as Ambacs former Chief Risk Officer.
Mr. McKinnons compensation was subject to the terms of the employment contract entered into with Ambac on January 30, 2007, as discussed on page 66 below. As such, the Committee was obligated to award Mr. McKinnon the minimum
cash bonus and equity incentive awards provided for under his employment agreement. In accordance with the terms of the employment contract, we paid Mr. McKinnon a bonus of $850,000 and awarded $750,000 cash in lieu of our obligation to award
RSUs and stock options with a value of $750,000. Because Mr. McKinnon was retirement eligible and any equity award would be vested at time of grant, the Committee paid Mr. McKinnon cash in lieu of the equity incentive awards. The Committee
deemed this in the Corporations best interest so as not to utilize limited shares available under our Equity Plan.
Because Mr. McKinnon was eligible for retirement, all unvested equity awards previously granted to Mr. McKinnon vested in accordance with the
terms and conditions of the underlying award agreements upon his termination of employment. The retirement provisions applicable to Mr. McKinnon are the same that apply to all of our employees. For more details about Mr. McKinnons
employment agreement please see page 66 below.
Supplemental Information
The table below shows the Committees view of the
compensation that it awarded the NEOs in fiscal 2008 under the policies and programs described in this Compensation Discussion and Analysis. Because, in prior years, a high percentage of our NEO compensation was stock-based, and because
SEC rules require stock-based compensation to be reported based on what is expensed for financial statement purposes, this alternative table is being provided as a guide to understanding the difference between the Committees actions with
respect to NEO awards in fiscal 2008 as described in this Compensation Discussion and Analysis, and the amounts required to be reported on the Summary Compensation Table. Inclusion of the table is not intended to replace the 2008 Summary
Compensation Table, but rather to demonstrate how the Committee views the compensation awarded to our NEOs for 2008. As shown below, no stock based compensation was awarded for the 2008 performance year other than for Messrs. Callen and Wallis.
Rather, the amounts reported in the Summary Compensation Table for fiscal 2008 for stock awards and stock option awards relate to stock-based compensation and other long-term incentive grants awarded in previous years.
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Committees View of Fiscal 2008 Compensation Awarded
|
|
Fiscal 2008 Compensation as
Reported in the Summary Compensation Table
|
|
|
Salary
($)(1)
|
|
Annual
Bonus
($)(2)
|
|
Portion
of Stock
Awards
earned
in
Fiscal
2008
($)(3)(5)
|
|
Portion of
Option
Awards
earned in
Fiscal
2008
($)(4)(5)
|
|
All Other
Compensation
($)
|
|
Total
Compensation
Awarded ($)
|
|
Salary
($)(1)
|
|
Annual
Bonus
($)(2)
|
|
Portion
of Stock
Awards
expensed
in Fiscal
2008 ($)
|
|
Portion of
Option
Awards
expensed
in Fiscal
2008
($)
|
|
All Other
Compensation
($)
|
|
Total
Compensation
Awarded ($)
|
Michael A. Callen
|
|
607,500
|
|
975,000
|
|
33,333
|
|
0
|
|
35,900
|
|
1,651,733
|
|
607,500
|
|
975,000
|
|
33,333
|
|
0
|
|
35,900
|
|
1,651,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David W. Wallis
|
|
718,592
|
|
500,000
|
|
337,500
|
|
337,500
|
|
746,120
|
|
2,639,712
|
|
718,592
|
|
500,000
|
|
488,472
|
|
378,881
|
|
746,120
|
|
2,832,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert J. Genader
|
|
35,000
|
|
0
|
|
0
|
|
0
|
|
6,000
|
|
41,000
|
|
35,000
|
|
0
|
|
0
|
|
0
|
|
6,000
|
|
41,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sean T. Leonard
|
|
380,000
|
|
950,000
|
|
0
|
|
0
|
|
47,000
|
|
1,377,000
|
|
380,000
|
|
950,000
|
|
270,349
|
|
337,610
|
|
47,000
|
|
1,984,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas C. Renfield-Miller
|
|
300,000
|
|
550,000
|
|
0
|
|
0
|
|
35,323
|
|
885,323
|
|
300,000
|
|
550,000
|
|
745,200
|
|
253,876
|
|
35,323
|
|
1,884,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin N. Doyle
|
|
260,000
|
|
950,000
|
|
0
|
|
0
|
|
27,800
|
|
1,237,800
|
|
260,000
|
|
950,000
|
|
182,009
|
|
316,355
|
|
27,800
|
|
1,736,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Shoback
|
|
250,000
|
|
350,000
|
|
0
|
|
0
|
|
22,546
|
|
622,546
|
|
250,000
|
|
350,000
|
|
218,579
|
|
276,870
|
|
22,546
|
|
1,117,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John W. Uhlein III
|
|
350,000
|
|
750,000
|
|
0
|
|
0
|
|
392,200
|
|
1,492,200
|
|
350,000
|
|
750,000
|
|
198,804
|
|
532,830
|
|
392,200
|
|
2,223,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William T. McKinnon
|
|
400,000
|
|
850,000
|
|
0
|
|
0
|
|
756,462
|
|
2,006,462
|
|
400,000
|
|
850,000
|
|
250,029
|
|
0
|
|
756,462
|
|
2,256,491
|
|
(1)
|
Amounts shown equal base pay earned in fiscal 2008.
|
|
|
(2)
|
Amounts shown equal the cash bonus paid with respect to fiscal 2008 performance.
|
|
|
(3)
|
Amounts shown for Mr. Wallis are based on the grant date market value of Restricted Stock Units (
RSUs
) awarded in 2008 in recognition of the new position
that Mr. Wallis assumed during the year. As the award to Mr. Wallis was a front-loaded grant with a value of 50% of the projected annual grants over a five-year period, the Committee views 20% of the award as attributable to 2008, and such
amount is reported in the table.
|
|
|
|
Amounts shown for Mr. Callen are based on the grant date market value of RSUs awarded in 2008 in lieu of his non-employee directors annual equity award for which he was ineligible
while serving as Ambacs Interim President and CEO.
|
|
|
(4)
|
Amounts shown equal the fair value of options awarded in 2008 in recognition of the new position that Mr. Wallis assumed during the year. As the award to Mr. Wallis was a
front-loaded grant with a value of 50% of the projected annual grants over a five-year period, the Committee views 20% of the award as attributable to 2008, and such amount is reported in the table.
|
|
|
(5)
|
Other than Messrs. Callen and Wallis, no NEO or executive officer was awarded RSUs or stock options with respect to fiscal 2008 performance.
|
|
|
(6)
|
Amounts shown equal the amounts reported in the All Other Compensation column of the Summary Compensation Table below.
|
|
45
Tax Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code includes potential limitations on the deductibility of compensation in excess of $1 million paid to a
companys CEO and the three other most highly compensated executive officers serving on the last day of the year. This limitation does not apply to compensation that meets the requirements of qualified performance-based compensation
under Section 162(m). The Committee considers the impact of this rule when developing and implementing Ambacs executive compensation program.
Historically, the Committee has generally taken necessary actions to ensure the deductibility of payments of its annual bonuses and stock options,
whenever possible. For 2008, none of the annual bonuses that we pay to our executive officers whose compensation qualifies as performance-based compensation under Section 162(m), with the result that compensation in excess of $1 million paid to
these officers will not be deductible to Ambac. While we view preserving tax deductibility as an important objective, we do not consider it to be the sole objective in establishing executive compensation. In specific instances, we have and in the
future may authorize compensation arrangements that are not fully tax deductible but which promote other important objectives of Ambac.
46
Stock Ownership Guidelines
Effective October 2008, Ambac suspended its stock ownership targets. Given the precipitous fall in Ambacs stock price, none of our NEOs meet our
stock ownership guidelines, which are based on a level of ownership of Ambac stock
(based on the market value of Ambac common stock)
as a multiple of the officers total cash compensation
(base salary plus cash bonus)
. These
multiples ranged from seven times total cash compensation
(in the case of the CEO)
to a low of one and one-half times total cash compensation for managing directors.
Nevertheless, our executives continue to hold a significant amount of Ambac stock outright, in the SIP and in the form of
outstanding equity grants. The table below details as of February 1, 2009, the holdings of Ambacs currently serving NEOs.
(For purposes of computing an executives ownership towards their target, we consider shares owned by the
executive, family members and trusts for the executive or family members, shares held in the Ambac stock fund of our SIP and the value of restricted stock units granted and outstanding. We do not consider any shares subject to stock options.)
|
|
|
|
|
|
|
|
|
Key Executive
|
|
Shares
Owned
Outright
|
|
RSUs
|
|
Shares Owned
in SIP
|
|
Stock Options Outstanding
Vested/Unvested
|
Michael Callen*
|
|
209,519
|
|
35,881
|
|
0
|
|
7,500 / 0
|
|
|
|
|
|
David Wallis**
|
|
33,572
|
|
399,774
|
|
0
|
|
47,500 / 437,325
|
|
|
|
|
|
Sean Leonard
|
|
6,057
|
|
48,034
|
|
6,364
|
|
28,141 / 63,973
|
|
|
|
|
|
Kevin J. Doyle
|
|
21,517
|
|
40,212
|
|
10,724
|
|
73,184 / 86,516
|
|
|
|
|
|
Douglas Renfield-Miller
|
|
53,172
|
|
66,047
|
|
7,136
|
|
86,184 / 127,516
|
|
|
|
|
|
Robert
Shoback
|
|
31,976
|
|
41,745
|
|
5,707
|
|
57,267 / 76,933
|
|
*
|
Mr. Callens RSUs and options were granted under the Directors Plan, with the exception of his June 2008 award as described in footnote 1 to the Grants of Plan Based
Awards Table below.
|
|
|
**
|
Mr. Wallis was an expatriate and not eligible to participate in Ambacs SIP until August 1, 2008.
|
|
All Ambac employees, including our NEOs, are prohibited from making short sales or engaging in transactions involving puts, calls and other types of options in Ambac securities, including equity swaps and similar derivative transactions. We
prohibit these activities because we believe that they may put an employee or executive officers personal gain in conflict with the best interests of Ambac and its stockholders.
47
C
OMPENSATION
C
OMMITTEE
R
EPORT
The Compensation Committee has reviewed and discussed the above Compensation
Discussion and Analysis with Ambacs management. Based on its review and discussions, the Compensation Committee recommended to the Board of Directors that the compensation discussion and analysis section be included in this Proxy Statement.
|
The Compensation Committee
|
|
Thomas C. Theobald,
Chairman
|
Jill M. Considine
|
Paul R. DeRosa
|
Philip N. Duff
|
Laura S. Unger
|
Henry D.G. Wallace
|
March 18, 2009
48
2008 Summary Compensation Table
The table below summarizes the total compensation paid or earned by each of
the Named Executive Officers (
NEOs
) for the fiscal year ended December 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and
Principal Position
(a)
|
|
Year
(b)
|
|
|
|
Salary($)
(c)
|
|
|
|
Bonus($)
(d)(2)
|
|
|
|
Stock
Awards($)
(e)(3)
|
|
|
|
Option
Awards($)
(f)(4)
|
|
|
|
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings($)
(h)(5)(10)
|
|
|
|
All Other
Compensation
($)
(i)(6)(7)(8)(9)
|
|
|
|
Total($)
(j)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael A. Callen(1)
|
|
2008
|
|
|
|
607,500
|
|
|
|
975,000
|
|
|
|
33,333
|
|
|
|
0
|
|
|
|
0
|
|
|
|
35,900
|
|
|
|
1,651,733
|
Executive Chairman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David W. Wallis(1)
|
|
2008
|
|
|
|
718,592
|
|
|
|
500,000
|
|
|
|
488,472
|
|
|
|
378,881
|
|
|
|
0
|
|
|
|
746,120
|
|
|
|
2,832,065
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert J. Genader(1)
|
|
2008
|
|
|
|
35,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
6,000
|
|
|
|
41,000
|
Former Chairman, President and Chief Executive Officer
|
|
2007
2006
|
|
|
|
650,000
575,000
|
|
|
|
0
1,650,000
|
|
|
|
0
3,437,573
|
|
|
|
0
5,165,600
|
|
|
|
0
335,796
|
|
|
|
78,000
71,562
|
|
|
|
728,000
11,235,531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sean T. Leonard
|
|
2008
|
|
|
|
380,000
|
|
|
|
950,000
|
|
|
|
270,349
|
|
|
|
337,610
|
|
|
|
0
|
|
|
|
47,000
|
|
|
|
1,984,959
|
Senior Vice President and
Chief Financial Officer
|
|
2007
2006
|
|
|
|
380,000
350,000
|
|
|
|
700,000
575,000
|
|
|
|
311,993
166,667
|
|
|
|
396,196
145,508
|
|
|
|
0
32,883
|
|
|
|
45,600
31,500
|
|
|
|
1,833,789
1,301,558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas C. Renfield-Miller
|
|
2008
|
|
|
|
300,000
|
|
|
|
550,000
|
|
|
|
745,200
|
|
|
|
253,876
|
|
|
|
0
|
|
|
|
35,323
|
|
|
|
1,884,399
|
Executive Vice President
|
|
2007
|
|
|
|
300,000
|
|
|
|
800,000
|
|
|
|
558,104
|
|
|
|
1,100,213
|
|
|
|
0
|
|
|
|
49,545
|
|
|
|
2,807,862
|
|
|
2006
|
|
|
|
250,000
|
|
|
|
900,000
|
|
|
|
379,343
|
|
|
|
573,026
|
|
|
|
50,535
|
|
|
|
48,356
|
|
|
|
2,201,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin N. Doyle
|
|
2008
|
|
|
|
260,000
|
|
|
|
950,000
|
|
|
|
182,009
|
|
|
|
316,355
|
|
|
|
0
|
|
|
|
27,800
|
|
|
|
1,736,164
|
Executive Vice President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Shoback
|
|
2008
|
|
|
|
250,000
|
|
|
|
350,000
|
|
|
|
218,579
|
|
|
|
276,870
|
|
|
|
0
|
|
|
|
22,546
|
|
|
|
1,117,995
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John W. Uhlein III
|
|
2008
|
|
|
|
350,000
|
|
|
|
750,000
|
|
|
|
198,804
|
|
|
|
532,830
|
|
|
|
0
|
|
|
|
392,200
|
|
|
|
2,223,834
|
Executive Vice President
|
|
2007
|
|
|
|
350,000
|
|
|
|
750,000
|
|
|
|
416,665
|
|
|
|
938,801
|
|
|
|
0
|
|
|
|
42,000
|
|
|
|
2,497,466
|
|
|
2006
|
|
|
|
300,000
|
|
|
|
975,000
|
|
|
|
466,861
|
|
|
|
626,904
|
|
|
|
88,320
|
|
|
|
27,000
|
|
|
|
2,484,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William T. McKinnon
|
|
2008
|
|
|
|
400,000
|
|
|
|
850,000
|
|
|
|
250,029
|
|
|
|
0
|
|
|
|
0
|
|
|
|
756,462
|
|
|
|
2,256,491
|
Senior Managing Director
|
|
2007
|
|
|
|
400,000
|
|
|
|
800,000
|
|
|
|
675,039
|
|
|
|
198,575
|
|
|
|
0
|
|
|
|
48,000
|
|
|
|
2,121,614
|
|
|
2006
|
|
|
|
300,000
|
|
|
|
725,000
|
|
|
|
585,135
|
|
|
|
599,355
|
|
|
|
127,892
|
|
|
|
27,000
|
|
|
|
2,369,382
|
|
(1)
|
Mr. Genader served as Ambacs Chief Executive Officer for 16 days during 2008. He retired effective January 16, 2008. Mr. Wallis served as Ambacs Chief
Risk Officer from February 8, 2008, until his appointment as Ambacs President and Chief Executive Officer on October 21, 2008. Mr. Callen served as Ambacs Interim Chief Executive Officer from January 16, 2008 to
October 21, 2008. He continues to serve Ambac as its Executive Chairman.
|
|
|
(2)
|
All of the NEOs elected to receive their 2008 bonus in cash. For 2007 bonuses, Mr. Wallis elected to receive 25% of his bonus, paid in January 2008, in the form of Restricted Stock
Units (
RSUs
) and Mr. Shoback elected to receive 10% of his bonus, paid in January 2008, in the form of RSUs, pursuant to the Senior Officer Deferred Compensation SubPlan. For 2006 bonuses, each of Messrs. Genader, Leonard
and Renfield-Miller elected to receive 25% of his bonus, paid in January 2007, in the form of RSUs, pursuant to the Senior Officer Deferred Compensation SubPlan. Each officer who elected to have up to 25% of his 2006 or 2007 bonus awarded in RSUs
was entitled to receive RSUs granted at a 25% discount to the market value for Ambac common stock at the time of grant. The RSUs corresponding to the 25% discount awarded to Mr. Genader in January 2007 were valued at
|
|
49
|
$137,538, and this amount is included in column (e) for 2006 as a result of Mr. Genaders retirement eligibility. For other NEOs, financial accounting expense in
respect of the RSUs corresponding to the discount is recognized starting in 2007. All RSUs resulting from deferrals of 2007 bonus are reported in the Grants of Plan Based Awards table included in this Proxy Statement.
|
|
|
(3)
|
This column represents the compensation costs of RSUs for financial reporting purposes for the year under FAS 123R. See Note 13 to the Audited Financial Statements contained in
(i) Ambacs Annual Report on Form 10-K for the fiscal year ended December 31, 2008, (ii) Ambacs Annual Report on Form 10-K for the fiscal year ended December 31, 2007, and (iii) Ambacs Annual Report on Form
10-K for the fiscal year ended December 31, 2006 for the assumptions made in determining FAS 123R values. The FAS 123R value as of the grant date for RSUs is spread over the number of months of service required for the grant to become vested.
The amount recognized as accounting expense under FAS 123R does not necessarily correspond to the amount paid to or realized by the NEO, and, there can be no assurance that FAS 123R amounts will ever be realized. The 2006 amounts for Messrs.
Genader and McKinnon, the 2007 amount for Mr. McKinnon and the 2008 amount for Mr. Renfield-Miller, also include accelerated financial accounting expense attributable to invested amounts being recognized in 2006, 2007, or 2008, as the case
may be, as the executives are retirement eligible.
|
|
|
(4)
|
This column represents the compensation costs of stock options recognized for financial reporting purposes for the 2006, 2007 and 2008 years under FAS 123R. See Note 13 to the
Audited Financial Statements contained in (i) Ambacs Annual Report on Form 10-K for the fiscal year ended December 31, 2008, (ii) Ambacs Annual Report on Form 10-K for the fiscal year ended December 31, 2007, and
(iii) Ambacs Annual Report on Form 10-K for the fiscal year ended December 31, 2006 for the assumptions made in determining FAS 123R values. The FAS 123R value as of the grant date for stock options is recognized over the period
required for the grant to become vested. The 2006 amounts for Messrs. Genader and McKinnon, the 2007 amount for Mr. McKinnon and the 2008 amount for Mr. Renfield-Miller also include accelerated financial accounting expense attributable to
unvested amounts being recognized in 2006 as the executives are retirement eligible. The amount recognized as accounting expense under FAS 123R does not necessarily correspond to the amount paid to or realized by the NEO, and there can be no
assurance that FAS 123R amounts will ever be realized.
|
|
|
(5)
|
This column represents the increase in the actuarial present value of each NEOs accumulated benefit under Ambacs Pension Plan and Supplemental and Excess Benefits Plans
for the 2006 and 2007 fiscal year. No NEO was credited with above-market or preferential earnings on nonqualified deferred compensation.
|
|
|
(6)
|
For 2008, Mr. Callens
All Other Compensation
also includes additional transportation fees to and from Ambacs office. Mr. Callen
voluntarily discontinued this service in October 2008.
|
|
|
(7)
|
For 2008, Mr. Walliss
All Other Compensation
includes $666,879, which is comprised of (i) the cost of flights to New York from London for his
family, (ii) $76,000, the rental cost of his living accommodations in New York, (iii) a goods and services allowance pursuant to Ambacs Tax Equalization Policy for Employees who are Green Card Holders, (iv) tax
preparation costs, and (v) $574,070 as tax equalization paid in 2008 on his annual income taxes as part of his expatriate benefits package. The tax preparation fees were converted to U.S. Dollars from British Sterling using the conversion rate
on December 31, 2008 of 1.46 U.S. Dollars to 1 British Pound. The tax equalization was calculated in part using the conversion rate on March 31, 2008 of 1.98 U.S. Dollars to 1 British Pound.
|
|
50
|
(8)
|
The column called
All Other Compensation
includes the amounts that Ambac contributed or credited on behalf of the NEOs in 2006, 2007 and 2008 to
(a) our Savings Incentive Plan (the
SIP
), and (b) our Non-Qualified SIP. We credit amounts that we are precluded from contributing to the SIP because of limitations under the Internal Revenue Code of 1986, as
amended, to accounts that we maintain under Ambacs Non-Qualified SIP. For 2008, these amounts were as follows:
|
|
|
|
|
|
|
Named Executive Officers
|
|
2008
Contributions
to the SIP($)
|
|
2008 Credits to the
Non-Qualified
SIP($)
|
Mr. Callen
|
|
13,800
|
|
5,400
|
Mr. Wallis
|
|
18,415
|
|
60,826
|
Mr. Genader
|
|
6,000
|
|
|
Mr. Leonard
|
|
27,108
|
|
19,892
|
Mr. Renfield-Miller
|
|
25,723
|
|
9,600
|
Mr. Doyle
|
|
24,200
|
|
3,600
|
Mr. Shoback
|
|
20,146
|
|
2,400
|
Mr. Uhlein
|
|
24,300
|
|
17,900
|
Mr. McKinnon
|
|
6,462
|
|
|
|
(9)
|
The amounts disclosed for Mr. Uhlein include a $350,000 severance payment, paid pursuant to an agreement between Ambac and Mr. Uhlein, which is described in more detail
below on page 66.
|
|
The amounts
disclosed for Mr. McKinnon include a $750,000 payment, paid pursuant to an employment agreement between Ambac and Mr. McKinnon, which is described in more detail below on page 66.
51
2008 Grants of Plan-Based Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
(a)
|
|
Grant
Date
(b)
|
|
|
|
All Other
Stock Awards:
Number of
Shares of
Stock or
Units(#)
(i)(1)
|
|
All Other
Option Awards:
Number of
Securities
Underlying
Options(#)
(j)(2)
|
|
Exercise or Base
Price of
Option Awards
($/Sh)
(k)(2)
|
|
Grant Date
Fair Value of
Stock and
Option Awards($)
(l)(3)
|
Michael A. Callen
|
|
6/03/08
|
|
|
|
33,334
|
|
0
|
|
3.00
|
|
RSUs: 100,002
Options: 0
|
David W. Wallis
|
|
1/28/08
|
|
|
|
342,293
|
|
33,000
|
|
11.13
|
|
RSUs: 611,093
Options: 2,171,656
|
|
|
5/06/08
|
|
|
|
54,904
|
|
380,325
|
|
4.93
|
|
RSUs: 1,687,504
Options: 188,430
|
Robert J. Genader
|
|
1/28/08
|
|
|
|
0
|
|
0
|
|
0
|
|
RSUs: 0
Options: 0
|
Sean T. Leonard
|
|
1/28/08
|
|
|
|
41,330
|
|
46,000
|
|
11.13
|
|
RSUs: 460,003
Options: 262,660
|
Douglas C.
Renfield-Miller
|
|
1/28/08
|
|
|
|
57,503
|
|
64,000
|
|
11.13
|
|
RSUs: 640,008
Options: 365,440
|
Kevin J. Doyle
|
|
1/28/08
|
|
|
|
35,939
|
|
40,000
|
|
11.13
|
|
RSUs: 400,001
Options: 228,400
|
Robert Shoback
|
|
1/28/08
|
|
|
|
38,036
|
|
35,000
|
|
11.13
|
|
RSUs: 423,341
Options: 199,850
|
John W. Uhlein III
|
|
1/28/08
|
|
|
|
57,503
|
|
64,000
|
|
11.13
|
|
RSUs: 640,008
Options: 365,440
|
William T. McKinnon
|
|
1/28/08
|
|
|
|
38,186
|
|
32,500
|
|
11.13
|
|
RSUs: 425,010
Options: 185,575
|
|
(1)
|
Each restricted stock unit (
RSU
) represents a contingent and unsecured promise of Ambac to transfer to the recipient one share of our common stock on the
settlement date of the RSU. Dividend equivalents are accumulated during the period between grant settlements in the form of additional RSUs.
|
|
On
June 3, 2008, Mr. Callen was awarded 33,334 RSUs under the Equity Plan in lieu of his non-employee director annual equity award for which he was ineligible while serving as Ambacs Interim President and CEO. This award will vest on
June 3, 2009 and will be payable in shares of Ambac common stock.
Column (i) includes the following RSUs that were granted to each executive on January 28, 2008 for their service in 2007 (
Long-term Incentive RSUs
): Mr. Wallis29,650;
Mr. Leonard41,330; Mr. Renfield-Miller57,503; Mr. Doyle35,939; Mr. Shoback31,447; and Mr. Uhlein57,503. These RSUs generally vest in three years and will be payable in shares of Ambac common
stock on January 28, 2011.
Mr. Wallis elected to receive
25% of his 2007 bonus, paid in January 2008, in the form of RSUs and Mr. Shoback elected to receive 10% of his 2007 bonus, paid in 2008, in the form of RSUs, pursuant to the SubPlan (
2007 Bonus RSUs
). Pursuant to the
SubPlan, 2007 Bonus RSUs awarded in respect of an executives deferral of up to 25% of his bonus were granted at a 25% discount to the market value of Ambac common stock at the time of grant and will vest in four equal installments on the first
four anniversaries of the grant date. Column (i) includes the following 2007 Bonus RSUs that were granted on January 28, 2008: Mr. Wallis18,941 and Mr. Shoback4,992. The amounts deferred by Messrs. Wallis and Shoback
in consideration for these 2007 Bonus RSUs are as follows: Mr. Wallis$210,813 and Mr. Shoback$55,004.
Notwithstanding the vesting schedules described above, generally, any RSUs that have not previously vested shall vest in full upon the termination of an
executives employment with Ambac by reason of death, permanent disability or retirement at age 55 or older after at least five years of continuous service with Ambac.
|
(2)
|
Options allow the grantee to purchase a share of Ambac common stock at an exercise price equal to the fair market value of Ambac common stock on the grant date. Options included in
column (j) were granted to the named
|
|
52
|
executive officers on January 28, 2008. These options have an exercise price per share of $11.13, which was the closing price of Ambac common stock on the grant date. Each
executives options will vest in three equal installments on the first, second and third anniversaries of the date of grant. Vesting is accelerated upon retirement, death or permanent disability. Generally, all of the options awarded to NEOs
will expire seven years from the date of grant or earlier if employment terminates.
|
|
|
(3)
|
This column reflects the full grant date fair value of stock and option awards computed in accordance with FAS 123R.
|
|
The grant
date fair value for the RSUs was $11.13, the closing price of Ambacs common stock on the NYSE on the date of grant of January 28, 2008.
The FAS 123R weighted average grant date fair value was $5.71 for each option granted in 2008. See Footnote 13 to the Notes of the Audited Financial
Statements contained in Ambacs Annual Report on Form 10-K for the fiscal year ended December 31, 2008 for assumptions made in determining FAS 123R values. There can be no assurance that the options will ever be exercised (
in such a
case, no value will be realized by the executive
) or that value on exercise will equal the FAS 123R value.
53
2008 Outstanding Equity Awards at Fiscal Year-End
(
1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
Name
|
|
Number
of
Securities
Underlying
Options
(#)
Exercisable
(b)
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
(c)
|
|
Option
Exercise
Price
($)
(e)
(12)
|
|
|
Option
Expiration
Date
(f) (23)
|
|
Number of
Shares or
Units of Stock
that Have
Not
Vested
(#) (g)
|
|
|
Market Value
of
Shares or Units
of Stock That
Have Not Vested
($)
(h) (24)
|
|
|
|
|
|
|
|
Michael A. Callen
|
|
3,750
|
|
0
|
|
65.30
|
|
|
5/07/2009
|
|
33,586
|
(2)
|
|
43,662
|
|
|
3,750
|
|
0
|
|
59.92
|
|
|
5/06/2010
|
|
2,295
|
(2)
|
|
2,984
|
|
|
|
|
|
|
|
|
|
|
|
Total: 35,881
|
|
|
Total: 46,646
|
|
|
|
|
|
|
|
David W. Wallis
|
|
13,000
|
|
0
|
|
58.93
|
(3)
|
|
1/22/2009
|
|
1,896
|
(13)
|
|
2,464
|
|
|
15,000
|
|
0
|
|
56.14
|
(4)
|
|
1/21/2010
|
|
2,376
|
(14)
|
|
3,089
|
|
|
4,000
|
|
4,000
|
|
73.71
|
(5)
|
|
1/26/2011
|
|
30,236
|
(15)
|
|
39,307
|
|
|
0
|
|
9,000
|
|
79.30
|
(6)
|
|
1/24/2012
|
|
1,582
|
(16)
|
|
2,056
|
|
|
4,500
|
|
4,500
|
|
74.43
|
(7)
|
|
1/20/2013
|
|
19,315
|
(17)
|
|
25,110
|
|
|
0
|
|
17,500
|
|
87.27
|
(8)
|
|
1/29/2014
|
|
6,439
|
(3)
|
|
8,370
|
|
|
0
|
|
33,000
|
|
11.13
|
(9)
|
|
1/28/2015
|
|
346,271
|
(10)
|
|
450,152
|
|
|
0
|
|
380,325
|
|
4.93
|
(10)
|
|
5/06/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: 408,115
|
|
|
Total: 530,548
|
|
|
|
|
|
|
|
Robert J. Genader
(22)
|
|
120,000
|
|
0
|
|
58.93
|
(3)
|
|
1/22/2009
|
|
0
|
|
|
0
|
|
|
135,000
|
|
0
|
|
56.14
|
(4)
|
|
1/21/2010
|
|
|
|
|
|
|
|
100,000
|
|
0
|
|
73.71
|
(5)
|
|
1/16/2011
|
|
Total: 0
|
|
|
Total: 0
|
|
|
110,000
|
|
0
|
|
79.30
|
(6)
|
|
1/16/2011
|
|
|
|
|
|
|
|
110,000
|
|
0
|
|
74.43
|
(7)
|
|
1/16/2011
|
|
|
|
|
|
|
|
110,000
|
|
0
|
|
87.27
|
(8)
|
|
1/16/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
Sean T. Leonard
|
|
3,307
|
|
3,307
|
|
72.92
|
(11)
|
|
7/19/2012
|
|
5,266
|
(13)
|
|
6,846
|
|
|
9,500
|
|
9,500
|
|
74.43
|
(7)
|
|
1/23/2013
|
|
4,751
|
(14)
|
|
6,176
|
|
|
0
|
|
20,500
|
|
87.27
|
(8)
|
|
1/29/2014
|
|
1,138
|
(19)
|
|
1,479
|
|
|
0
|
|
46,000
|
|
11.13
|
(9)
|
|
1/28/2015
|
|
569
|
(14)
|
|
740
|
|
|
|
|
|
|
|
|
|
|
|
42,146
|
(15)
|
|
54,791
|
|
|
|
|
|
|
|
|
|
|
|
Total: 53,870
|
|
|
Total: 70,032
|
|
|
|
|
|
|
|
Douglas C. Renfield-Miller
|
|
20,000
|
|
0
|
|
58.93
|
(3)
|
|
1/22/2009
|
|
869
|
(13)
|
|
1,130
|
|
|
20,000
|
|
0
|
|
56.14
|
(4)
|
|
1/21/2010
|
|
3,512
|
(18)
|
|
4,566
|
|
|
10,000
|
|
10,000
|
|
73.71
|
(5)
|
|
1/16/2011
|
|
909
|
(18)
|
|
1,182
|
|
|
2,350
|
|
2,350
|
|
73.71
|
(5)
|
|
1/16/2011
|
|
871
|
(19)
|
|
1,132
|
|
|
0
|
|
25,000
|
|
79.30
|
(6)
|
|
1/24/2012
|
|
4,751
|
(20)
|
|
6,176
|
|
|
12,500
|
|
12,500
|
|
74.43
|
(7)
|
|
1/23/2013
|
|
1,798
|
(20)
|
|
2,337
|
|
|
0
|
|
35,000
|
|
87.27
|
(9)
|
|
1/29/2014
|
|
890
|
(21)
|
|
1,157
|
|
|
0
|
|
64,000
|
|
11.13
|
(9)
|
|
1/28/2015
|
|
58,639
|
(15)
|
|
76,231
|
|
|
|
|
|
|
|
|
|
|
|
Total: 72,239
|
|
|
Total: 93,911
|
|
|
|
|
|
|
|
Kevin J. Doyle
|
|
20,000
|
|
0
|
|
58.93
|
(3)
|
|
1/22/2009
|
|
3,512
|
(18)
|
|
4,566
|
|
|
20,000
|
|
0
|
|
56.14
|
(4)
|
|
1/21/2010
|
|
3,564
|
(20)
|
|
4,633
|
|
|
7,500
|
|
7,500
|
|
73.71
|
(5)
|
|
1/16/2011
|
|
36,649
|
(15)
|
|
47,643
|
|
|
2,350
|
|
2,350
|
|
73.71
|
(5)
|
|
1/16/2011
|
|
|
|
|
|
|
|
0
|
|
20,000
|
|
79.30
|
(6)
|
|
1/24/2012
|
|
Total: 43,725
|
|
|
Total: 56,842
|
|
|
10,000
|
|
10,000
|
|
74.43
|
(7)
|
|
1/23/2013
|
|
|
|
|
|
|
|
0
|
|
20,000
|
|
87.27
|
(8)
|
|
1/29/2014
|
|
|
|
|
|
|
|
0
|
|
40,000
|
|
11.13
|
(9)
|
|
1/28/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Shoback
|
|
13,500
|
|
0
|
|
58.93
|
(3)
|
|
1/22/2009
|
|
553
|
(13)
|
|
719
|
|
|
13,500
|
|
0
|
|
56.14
|
(4)
|
|
1/21/2010
|
|
3,160
|
(18)
|
|
4,108
|
|
|
7,500
|
|
7,500
|
|
73.71
|
(5)
|
|
1/16/2011
|
|
584
|
(18)
|
|
760
|
|
|
2,350
|
|
2,350
|
|
73.71
|
(5)
|
|
1/16/2011
|
|
585
|
(19)
|
|
761
|
|
|
0
|
|
17,500
|
|
79.30
|
(6)
|
|
1/24/2012
|
|
2,970
|
(20)
|
|
3.861
|
|
|
8,750
|
|
8,750
|
|
74.43
|
(7)
|
|
1/23/2013
|
|
1,088
|
(20)
|
|
1.414
|
|
|
0
|
|
17,500
|
|
87.27
|
(8)
|
|
1/29/2014
|
|
544
|
(21)
|
|
707
|
|
|
0
|
|
35,000
|
|
11.13
|
(9)
|
|
1/28/2015
|
|
32,068
|
(15)
|
|
41.689
|
|
|
|
|
|
|
|
|
|
|
|
1,680
|
(17)
|
|
2.183
|
|
|
|
|
|
|
|
|
|
|
|
5,040
|
(17)
|
|
6.551
|
|
|
|
|
|
|
|
|
|
|
|
Total: 48,272
|
|
|
Total: 62.754
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
Name
|
|
Number of
Securities
Underlying
Options
(#)
Exercisable
(b)
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
(c)
|
|
Option
Exercise
Price
($)
(e)
(10)
|
|
|
Option
Expiration
Date
(f) (23)
|
|
Number of
Shares or
Units of Stock
that Have
Not
Vested
(#) (g)
|
|
|
Market Value
of
Shares or Units
of Stock That
Have Not Vested
($)
(h) (21)
|
|
|
|
|
|
|
|
John W. Uhlein III
|
|
22,000
|
|
0
|
|
58.93
|
(3)
|
|
1/22/2009
|
|
5,266
|
(18)
|
|
6,846
|
|
|
22,000
|
|
0
|
|
56.14
|
(4)
|
|
1/21/2010
|
|
1,009
|
(18)
|
|
1,312
|
|
|
12,500
|
|
12,500
|
|
73.71
|
(5)
|
|
1/16/2010
|
|
964
|
(19)
|
|
1,253
|
|
|
3,550
|
|
3,550
|
|
73.71
|
(5)
|
|
1/16/2010
|
|
4,751
|
(20)
|
|
6,176
|
|
|
0
|
|
35,000
|
|
79.30
|
(6)
|
|
1/24/2010
|
|
58,639
|
(15)
|
|
76,231
|
|
|
17,500
|
|
17,500
|
|
74.43
|
(7)
|
|
1/23/2010
|
|
|
|
|
|
|
|
0
|
|
35,000
|
|
87.27
|
(8)
|
|
1/29/2010
|
|
Total: 70,629
|
|
|
Total: 91,818
|
|
|
0
|
|
64,000
|
|
11.13
|
(9)
|
|
1/28/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
William T. McKinnon
(22)
|
|
8,250
|
|
0
|
|
58.93
|
(3)
|
|
1/22/2009
|
|
0
|
|
|
0
|
|
|
16,500
|
|
0
|
|
56.14
|
(4)
|
|
1/21/2011
|
|
|
|
|
|
|
|
15,000
|
|
0
|
|
73.71
|
(5)
|
|
1/16/2011
|
|
Total: 0
|
|
|
Total: 0
|
|
|
5,900
|
|
0
|
|
73.71
|
(5)
|
|
1/16/2011
|
|
|
|
|
|
|
|
12,500
|
|
0
|
|
79.30
|
(6)
|
|
1/24/2011
|
|
|
|
|
|
|
|
12,500
|
|
0
|
|
74.43
|
(7)
|
|
1/23/2011
|
|
|
|
|
|
|
|
13,000
|
|
0
|
|
87.27
|
(8)
|
|
1/29/2011
|
|
|
|
|
|
|
|
32,500
|
|
0
|
|
11.13
|
(9)
|
|
1/28/2011
|
|
|
|
|
|
|
(1)
|
No executive officer had any unearned equity awards outstanding as of December 31, 2008.
|
|
|
(2)
|
On June 3, 2008, Mr. Callen was awarded 33,586 Restricted Stock Units in lieu of his non-employee directors annual equity award for which he was ineligible while
serving as our Interim President and CEO. This award will vest on June 3, 2009. In addition, 2,295 Restricted Stock Units were awarded to him as a non-employee director on May 7, 2007 as his five-year non-employee director award and will
vest on 2012.
|
|
|
(3)
|
Each option vested in two equal installments. 50% of the option vested on March 1, 2004 when the market price of Ambacs common stock met or exceeded $75.00 for 20
consecutive trading days and 50% of the option vested on May 15, 2007 when the market price of Ambacs common stock met or exceeded $90.00 for 20 consecutive trading days.
|
|
|
(4)
|
Each option vested in two equal installments. 50% of the option vested on February 9, 2004 when the market price of Ambacs common stock met or exceeded $72.00 for 20
consecutive trading days and 50% of the option vested on January 12, 2007 when the market price of Ambacs common stock met or exceeded $88.00 for 20 consecutive trading days.
|
|
|
(5)
|
The option vests in two equal installments. 50% vested when the market price of Ambacs common stock met or exceeded $90.00 on May 15, 2007 and 50% will vest when the
market price of Ambacs common stock meets or exceeds $105.00 for 20 consecutive trading days but in any event the option will become 100% vested no later than the sixth anniversary of the grant date, January 26, 2010.
|
|
|
(6)
|
The option will vest in two equal installments when the market price of Ambacs common stock meets or exceeds $100.00 and $120.00 for 20 consecutive trading days but in any
event the option will become 100% vested no later than the sixth anniversary of the grant date, January 24, 2011.
|
|
|
(7)
|
The option vests in two equal installments. 50% vested when the market price of Ambacs common stock met or exceeded $92.00 for 20 consecutive trading days on May 22, 2007
and 50% will vest when the market meets or exceeds $107.00 for 20 consecutive trading days but in any event the option will become 100% vested no later than the sixth anniversary of the grant date, January 23, 2012.
|
|
|
(8)
|
The option will vest in two equal installments when the market price of Ambacs Common Stock meets or exceeds $106.00 and $125.00 for 20 consecutive trading days but in any
event the option will become 100% vested no later than the sixth anniversary of the grant date, January 29, 2013.
|
|
55
|
(9)
|
This option will vest in three equal installments on the first, second and third anniversaries of January 28, 2008, the date of grant.
|
|
|
(10)
|
This option will vest on May 6, 2013 if Mr. Wallis remains in service through such date.
|
|
|
(11)
|
In connection with his election as Ambacs new Chief Financial Officer, Mr. Leonard was awarded a one time RSU grant and stock option grant on July 19, 2005. The RSUs
vested on July 19, 2008 and are reported in the 2008 Options Exercised and Stock Vested table below. The option vests in two equal installments. 50% vested when the market price of Ambacs common stock met or exceeded $92.00
for 20 consecutive trading days on May 22, 2007 and 50% will vest when the market meets or exceeds $110.00 for 20 consecutive trading days but in any event the option will become 100% vested no later than the sixth anniversary of the grant
date, July 19, 2011.
|
|
|
(12)
|
The exercise price per share is the fair market value of Ambacs common stock on the date of grant. For options awarded in 2006 and prior years, we determined the fair market
value by calculating the average of the high and low price of Ambacs common stock on the New York Stock Exchange on the date of grant. For all grants awarded in 2007 and subsequent years, the fair market value will be determined as the closing
price of Ambacs common stock on the New York Stock Exchange. Vesting for each of these grants is accelerated upon retirement, death or permanent disability. Generally, all of the NEOs stock options will expire seven years from the date
of grant or earlier if employment terminates.
|
|
|
(13)
|
These RSUs will vest on January 24, 2009.
|
|
|
(14)
|
These RSUs will vest on January 29, 2010.
|
|
|
(15)
|
These RSUs will vest on January 28, 2011.
|
|
|
(16)
|
These RSUs vest in three equal installments. The first third already vested on July 24, 2008. The second third will vest on July 29, 2009 the final third will vest on
July 29, 2010.
|
|
|
(17)
|
These RSUs vest over four years: the first 25% will vest on January 28, 2009, the second 25% on January 28, 2010; the third 25% on January 28, 2011 and the remainder
on January 28, 2012.
|
|
|
(18)
|
These RSUs will vest on January 23, 2009.
|
|
|
(19)
|
These RSUs will vest on January 23, 2010.
|
|
|
(20)
|
These RSUs will vest on January 29, 2010.
|
|
|
(21)
|
These RSUs will vest on January 29, 2011.
|
|
|
(22)
|
All of the options and RSUs held by Mr. Genader and Mr. McKinnon vested in full upon their retirement on January 13, 2008 and February 8, 2008, respectively,
except for the RSU award to McKinnon described in footnote 18 above.
|
|
|
(23)
|
If an executive officer retires, he or she will have the shorter of three years until the options normal expiration date to exercise his or her option. Mr. Genader
retired on January 16, 2008 and Mr. McKinnon retired on February 8, 2008.
|
|
|
(24)
|
The price of the Ambac common stock used to calculate the market value of the shares or units of stock that have not vested as of December 31, 2008 was $1.30, which was the
closing price of Ambacs common stock on the New York Stock Exchange on the last trading date of fiscal year 2008.
|
|
56
2008 Option Exercises and Stock Vested
(
1)
|
|
|
|
|
|
|
|
Stock Awards
|
Name
(a)
|
|
Number of
Shares
Acquired
on Vesting
(#)
(d)
|
|
|
Value
Realized
on Vesting
($)
(e)(2)
|
Michael A. Callen
|
|
649
|
|
|
3,057
|
|
|
|
David W. Wallis
|
|
3,344
|
|
|
30,463
|
|
|
|
Robert J. Genader
|
|
486,927
|
|
|
882,267
|
|
|
|
Sean T. Leonard
|
|
2,346
|
|
|
11,213
|
|
|
|
Douglas C. Renfield-Miller
|
|
6,694
|
(3)
|
|
79,124
|
|
|
|
Kevin J. Doyle
|
|
3,679
|
|
|
41,598
|
|
|
|
Robert Shoback
|
|
10,548
|
|
|
113,044
|
|
|
|
John W. Uhlein III
|
|
6,749
|
|
|
78,550
|
|
|
|
William T. McKinnon
|
|
50,762
|
|
|
239,758
|
|
(1)
|
This chart reflects the RSUs vested in 2008. No stock options were exercised in 2008.
|
|
|
(2)
|
Amounts reflect the market value of the stock on the day the stock vested.
|
|
|
(3)
|
Amounts include 3,438 restricted stock units with a market value, calculated using the closing price on December 31, 2008, of $4,469 that vested in 2008 but receipt of which
has been voluntarily deferred until termination of employment.
|
|
57
2008 Retirement Benefits
Currently, we maintain a tax-qualified defined contribution program to provide retirement income to all eligible U.S.
employees, including our named executive officers. We formerly maintained a related non-qualified defined contribution plan, the
Non-Qualified Savings Incentive Plan
, a tax-qualified defined benefit pension plan, the
Pension Plan
and two related non-qualified defined benefit plans, the
Supplemental Pension Plan
and the
Excess Benefits Plan
.
Savings Plan:
The Ambac Savings Incentive Plan (the
SIP
) is a defined contribution plan that is qualified under section 401(a) of the Internal
Revenue Code, under which eligible employees may elect to contribute a portion of their salary to the SIP. Ambac matches certain employee contributions and provides all eligible employees with (i) a 3% profit sharing contribution and
(ii) a 3% supplemental profit sharing contribution based on the employees salary. All employee contributions, matching contributions and profit sharing contributions are invested as directed by the participant. Contributions and earnings
thereon are paid out in accordance with elections made by the participant.
In 2008, we also maintained the Non-Qualified Savings Incentive Plan, to which we credited amounts that we were precluded from contributing to the SIP because of limitations under the Internal Revenue Code. We
terminated the Non-Qualified Savings Incentive Plan as of December 31, 2008 and the balances in participants notional accounts are generally scheduled to be distributed during the first quarter of 2009.
See Footnote 8 of the Summary Compensation Table on page 49 for information
about Ambacs contributions under the SIP and the Nonqualified SIP on behalf of the named executive officers.
Defined Benefit Plans:
The Pension Plan was a defined benefit plan qualified under Section 401(a) of the Internal Revenue Code that was designed to provide monthly
retirement benefits to eligible employees. We terminated the Pension Plan as of December 31, 2006. All of our named executive officers received a lump sum distribution of their benefit under the Pension Plan during the last quarter of 2007, and
no named executive officer will receive any further payments or benefits under the Pension Plan.
The Supplemental Pension Plan and the Excess Benefits Plan provided certain supplemental retirement benefits to certain of Ambacs highly paid
employees, including our executive officers. These plans paid eligible employees the difference between the amount payable under the Pension Plan and the amount they would have received under the Pension Plan without the limits on annual benefits
(
covered by the Excess Plan
) and annual earnings (
covered by the Supplemental Plan
) imposed by the Internal Revenue Code.
As a result of our terminating the Pension Plan as of December 31, 2006, employees ceased to accrue additional benefits under the Supplemental
Pension Plan and the Excess Benefits Plan as of that date. We merged the Excess Benefits Plan into the Supplemental Pension Plan as of January 1, 2008. Participants who had not commenced benefit payments under the non-qualified plans as of
December 31, 2007, including all of our named executive officers, received their benefits as an actuarially equivalent lump sum distribution in March 2008. The lump sum benefit was calculated using a discount rate of 4.69% and the mortality
table promulgated for use in determining minimum lump sums payable from qualified pension plans.
58
Effective January 1, 2007, Ambac replaced the retirement benefits under the defined benefit plans
with an enhanced matching contribution (
of up to 6% of salary
) to its Savings Incentive Plan and, through December 31, 2008, its Non-Qualified Savings Incentive Plan, described above.
The following table shows the payments made to our NEOs under the
Supplemental Pension Plan during 2008. As of December 31, 2008, none of our named executive officers had any accumulated benefit under the Supplemental Pension Plan, and no named executive officer will receive any further payments or benefits
under the Supplemental Pension Plan:
|
|
|
|
|
Name
(a)
|
|
Plan
Name
(b)
|
|
Payments During
Last Fiscal
Year ($)
(e)
|
Michael A. Callen
|
|
Supplemental Pension Plan
|
|
0
|
|
|
|
David W. Wallis
|
|
Supplemental Pension Plan
|
|
0
|
|
|
|
Robert J. Genader
|
|
Supplemental Pension Plan
|
|
619,101
|
|
|
|
Sean T. Leonard
|
|
Supplemental Pension Plan
|
|
9,149
|
|
|
|
Douglas C. Renfield-Miller
|
|
Supplemental Pension Plan
|
|
10,526
|
|
|
|
Kevin J. Doyle
|
|
Supplemental Pension Plan
|
|
5,622
|
|
|
|
Robert Shoback
|
|
Supplemental Pension Plan
|
|
875
|
|
|
|
John W. Uhlein
|
|
Supplemental Pension Plan
|
|
38,793
|
|
|
|
William T. McKinnon
|
|
Supplemental Pension Plan
|
|
63,877
|
59
2008 Nonqualified Deferred Compensation
The following table shows the executive contributions, Ambacs
contributions, earnings and balances for the NEOs in the Ambac Senior Officer Deferred Compensation SubPlan of the Equity Plan (the
SubPlan
), an unfunded, unsecured deferred compensation plan. The SubPlan allows executive
officers (
including NEOs
) and managing directors to defer all or a portion of their annual bonus. The following table also includes amounts contributed to each NEOs account under our Non-Qualified Savings Incentive Plan
(
Non-Qualified SIP
) and restricted stock units granted and deferred under a restoration option program that we discontinued in 2004.
Account balances under the SubPlan may be invested in phantom investments selected by the executive from an array of investment options or Ambac
Restricted Stock Units (
RSUs
). When participants elect to defer amounts pursuant to the SubPlan, they also select when the amounts ultimately will be distributed to them. Distributions may either be made in a specific
yearwhether or not employment has then endedor at a time that begins at or after the executives retirement or termination. Distributions can be made in a lump sum or annual installments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
(a)
|
|
Plan Name
|
|
Executive
Contributions
in Last
FY
($)
(b)(1)
|
|
Registrant
Contributions
in Last FY
($)
(c)(2)
|
|
Aggregate
Earnings
in Last
FY
($)
(d)(3)
|
|
|
Aggregate
Withdrawals/
Distributions
($)
(e)
|
|
|
Aggregate
Balance
at Last
FYE
($)
(f)(5)
|
Michael A. Callen
|
|
SubPlan
|
|
0
|
|
0
|
|
0
|
|
|
0
|
|
|
0
|
|
|
Non-Qualified SIP
|
|
0
|
|
5,400
|
|
0
|
|
|
(5,436
|
)
|
|
0
|
|
|
Other
(4)
|
|
0
|
|
0
|
|
0
|
|
|
0
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
0
|
|
5,400
|
|
0
|
|
|
(5,436
|
)
|
|
0
|
|
|
|
|
|
|
|
David W. Wallis
|
|
SubPlan
|
|
210,811
|
|
52,706
|
|
(241,699
|
)
|
|
(8,871
|
)
|
|
33,481
|
|
|
Non-Qualified SIP
|
|
0
|
|
60,826
|
|
0
|
|
|
(61,227
|
)
|
|
0
|
|
|
Other
(4)
|
|
0
|
|
0
|
|
0
|
|
|
0
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
210,811
|
|
113,532
|
|
0
|
|
|
(70,098
|
)
|
|
33,481
|
|
|
|
|
|
|
|
Robert J. Genader
|
|
SubPlan
|
|
0
|
|
0
|
|
(707,203
|
)
|
|
(51,882
|
)
|
|
0
|
|
|
Non-Qualified SIP
|
|
0
|
|
0
|
|
6,909
|
|
|
(403,431
|
)
|
|
0
|
|
|
Other
(4)
|
|
0
|
|
0
|
|
(8,955,767
|
)
|
|
(656,907
|
)
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
0
|
|
0
|
|
0
|
|
|
(1,112,220
|
)
|
|
0
|
|
|
|
|
|
|
|
Sean T. Leonard
|
|
SubPlan
|
|
0
|
|
0
|
|
(48,102
|
)
|
|
(7,228
|
)
|
|
2,219
|
|
|
Non-Qualified SIP
|
|
0
|
|
19,892
|
|
1,024
|
|
|
(44,721
|
)
|
|
0
|
|
|
Other
(4)
|
|
0
|
|
0
|
|
0
|
|
|
0
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
0
|
|
19,892
|
|
0
|
|
|
(51,949
|
)
|
|
2,219
|
|
|
|
|
|
|
|
Kevin J. Doyle
|
|
SubPlan
|
|
0
|
|
0
|
|
(6,188
|
)
|
|
(4,708
|
)
|
|
0
|
|
|
Non-Qualified SIP
|
|
0
|
|
3,600
|
|
1,261
|
|
|
(34,020
|
)
|
|
0
|
|
|
Other
(4)
|
|
0
|
|
0
|
|
0
|
|
|
0
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
0
|
|
3,600
|
|
0
|
|
|
(38,728
|
)
|
|
0
|
Doug Renfield-Miller
|
|
SubPlan
|
|
0
|
|
0
|
|
(631,067
|
)
|
|
0
|
|
|
34,225
|
|
|
Non-Qualified SIP
|
|
0
|
|
9,600
|
|
528
|
|
|
(22,388
|
)
|
|
0
|
|
|
Other
(4)
|
|
0
|
|
0
|
|
0
|
|
|
0
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
0
|
|
9,600
|
|
0
|
|
|
(61,116
|
)
|
|
34,225
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
(a)
|
|
Plan Name
|
|
Executive
Contributions
in Last
FY
($)
(b)(1)
|
|
Registrant
Contributions
in Last FY
($)
(c)(2)
|
|
Aggregate
Earnings
in Last
FY
($)
(d)(3)
|
|
|
Aggregate
Withdrawals/
Distributions
($)
(e)
|
|
|
Aggregate
Balance
at Last
FYE
($)
(f)(5)
|
Robert Shoback
|
|
SubPlan
|
|
55,000
|
|
18,331
|
|
(392,390
|
)
|
|
(53,410
|
)
|
|
22,547
|
|
|
Non-Qualified SIP
|
|
0
|
|
2,400
|
|
1,117
|
|
|
(29,347
|
)
|
|
0
|
|
|
Other
(4)
|
|
0
|
|
0
|
|
0
|
|
|
0
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
55,000
|
|
20,731
|
|
0
|
|
|
(82,757
|
)
|
|
22,547
|
|
|
|
|
|
|
|
John W. Uhlein III
|
|
SubPlan
|
|
0
|
|
0
|
|
(137,039
|
)
|
|
0
|
|
|
7,432
|
|
|
Non-Qualified SIP
|
|
0
|
|
17,900
|
|
3,837
|
|
|
(110,531
|
)
|
|
0
|
|
|
Other
(4)
|
|
0
|
|
0
|
|
0
|
|
|
0
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
0
|
|
17,900
|
|
0
|
|
|
(110,531
|
)
|
|
7,432
|
|
|
|
|
|
|
|
William T. McKinnon
|
|
SubPlan
|
|
0
|
|
0
|
|
(44,192
|
)
|
|
(19,343
|
)
|
|
0
|
|
|
Non-Qualified SIP
|
|
0
|
|
0
|
|
1,201
|
|
|
(71,571
|
)
|
|
0
|
|
|
Other
(4)
|
|
0
|
|
0
|
|
0
|
|
|
0
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
0
|
|
0
|
|
0
|
|
|
(90,914
|
)
|
|
0
|
|
(1)
|
The amounts reflected for the SubPlan in this column represent the amount of the 2007 deferred bonus that an executive elected to defer in the form of RSUs. These RSUs vest over
three years. Mr. Wallis elected to receive 25% of his 2007 bonus, paid in January 2008, in the form of RSUs and Mr. Shoback elected to receive 10% of his 2007 bonus, paid in January 2008, in the form of RSUs.
|
|
|
(2)
|
The amount shown for the SubPlan represents the 25% discount provided by Ambac to the executive pursuant to the SubPlan with respect to an executives election to defer up to
25% of his 2007 cash bonus in the form of RSUs. These RSUs generally vest on January 28, 2012, which will be the fourth anniversary of the date of grant; RSUs awarded to Mr. Genader and Mr. McKinnon vested upon retirement.
|
|
Of the
discounted RSUs reported in column (c), the following amounts were included in the FAS 123R stock award values reported in column (e) of the Summary Compensation Table: Mr. Wallis$13,704; Mr. Shoback$3,575.
The
Non-Qualified SIP
contribution
is based on the NEOs salary for 2008.
|
(3)
|
None of these earnings are above-market and consequently they are not reported in the Summary Compensation Table.
|
|
|
(4)
|
RSUs were granted and deferred pursuant to a Restoration Option Program. The Restoration Option Program permitted executives to exercise their stock options and defer receipt of the
gain from such stock options into Ambac restricted stock units until a specified date in the future or termination. We discontinued this Program in October 2004.
|
|
|
(5)
|
All amounts contributed by an NEO and by Ambac in prior years have been reported in the Summary Compensation Tables in our previously filed proxy statements in the year earned, to
the extent that the executive was named in such proxy statement and the amounts were so required to be reported in such tables.
|
|
61
Potential Payments upon Termination or Change in Control
With the exception of Mr. McKinnon, none of our named executive officers
had an employment agreement during 2008. In addition, none of our executive officers is eligible to receive benefits under the severance pay plan that we maintain for the majority of our full-time employees. With the exception of the payments
described above to Messrs. McKinnon and Uhlein, and with the exception of the entitlements under the Management Retention Agreements described below, none of our named executive officers is entitled to any payment at, following or in connection with
any termination of employment, any change in control of Ambac or any change in the named executive officers responsibilities other than entitlements to compensation or other benefits that were already fully earned and vested as of the relevant
event.
As noted earlier, Mr. McKinnon retired from Ambac
effective February 8, 2008. Mr. McKinnons entitlement to compensation for 2008 is described above under the heading Employment Agreement with William T. McKinnon. In addition, Mr. Uhlein resigned from Ambac effective
February 1, 2009. He received the payments described below under the heading Agreement with John W. Uhlein, III.
Management Retention Agreements
In General
|
We have entered into management retention agreements with each of our executive officers (
including our Named Executive Officers
), except Mr. Callen, to provide for payments and certain benefits
if they are terminated following a Change in Control (
as defined below
). These agreements also provide some level of income continuity for an executive officer should his or her employment be terminated without Cause
or for Good Reason in connection with a change in control.
|
Payments and Benefits After Change in Control
|
If there is a Change in Control and, within three years of the Change in Control, Ambac or its successor terminates the executives employment other than for Cause (
as defined below
),
or if the executive resigns for Good Reason (
as defined below
), the executive will:
|
|
·
|
|
receive a lump sum cash payment equal to two times the sum of (a) the executives highest annual base salary and (b) the product of the
executives highest bonus percentage (
as a percentage of base salary
) times his highest base salary;
|
|
·
|
|
receive a lump-sum payment equal to the amount that we would have contributed during the two years following termination to the executives account under the
SIP and any nonqualified plan we maintained; and
|
|
·
|
|
continue to participate in Ambacs medical and other welfare benefits programs for two years following termination (
or, if earlier, until the executive
begins coverage under the plans of a subsequent employer
).
|
In addition, these agreements provide that all stock options and restricted stock units awarded under the Equity Plan will vest in full upon the occurrence of a Change in Control, whether or not the executives
employment is subsequently terminated. We provide for accelerating the
62
|
vesting of equity awards to allow an executive to recognize gains attributable to the executives stewardship of Ambac prior to the Change in Control.
Ambac will also provide a gross-up to the executive in the event he or she is subject to excise tax for receipt of payments made pursuant to the agreement. We have concluded that an excise tax gross-up (
but not a gross-up for any other taxes
)
is appropriate in this circumstance in order to maintain the intended after-tax benefit to the executives and avoid the potentially variable application of the excise tax rules (
which can result in executives who received similar benefits under
the agreement having significantly different excise tax liability
).
|
Amendment to CEO Change in Control Agreement
|
In May 2008, the Committee approved an amendment to Mr. Walliss Management Retention Agreement that changed the definition of Reference Amount to provide for two times his highest
level of total cash compensation, which shall include only his base salary and annual cash bonus and exclude the value of any other awards.
|
Definitions
The following definitions are used in the Management Retention Agreements described above:
Change in Control
|
A
Change in Control
generally occurs if:
|
|
·
|
|
an individual, entity or group acquires beneficial ownership of 20% or more of our outstanding common stock;
|
|
·
|
|
a majority of our Board is replaced with directors who are not approved or recommended by our current Board; or
|
|
·
|
|
our stockholders approve a merger or similar business combination, or a sale of all or substantially all of Ambacs assets that causes our stockholders
immediately prior to the completion of the transaction to own less than 70% of outstanding shares and voting power of the resulting corporation.
|
Cause
|
Cause
for an executives termination generally includes:
|
|
·
|
|
the willful commission of acts that are dishonest and demonstrably and materially injurious to Ambac;
|
|
·
|
|
the conviction of certain felonies; or
|
|
·
|
|
a material breach of any of the executives agreements concerning confidentiality and proprietary information.
|
An executives termination will not be considered to have been for
Cause unless at least three-quarters of the members of the Board adopt a resolution finding that the executive has engaged in conduct that constitutes Cause as defined in the agreement.
63
Good Reason
|
An executive will generally have
Good Reason
to terminate his employment if:
|
|
·
|
|
a substantial adverse alteration in the nature or status of the executives authority, duties or responsibilities;
|
|
·
|
|
a material diminution in the executives base compensation (including as base compensation any amount permitted to be so included under Treas. Reg.
§1.409A-(n)(2)(ii)(A) or any successor provision);
|
|
·
|
|
the relocation of the office of the Executive to a location more than 25 miles from the location where the Executive is employed immediately prior to the Change in
Control; or
|
|
·
|
|
Ambac fails to honor its obligations under the agreement.
|
An executive must notify Ambac of the existence of an event or circumstance constituting
Good Reason
within 90 days of its first
occurrence, and Ambac will have 30 days to cure the event or circumstance.
64
The table below reflects the amount of compensation that would be owed to each of our named executive
officers (
NEOs
) in the event of termination of such executives employment without Cause, or the executives resignation for Good Reason, within three years after a Change in Control (
as Cause,
Good Reason and Change in Control are defined in the Management Retention Agreement described above
). The amounts shown assume that such termination was effective as of December 31, 2008, and thus includes amounts
earned through such time and are estimates of the amounts which would be paid out to the executives upon their termination. The actual amounts to be paid out can only be determined at the time of such executives separation from Ambac.
Mr. Genader and Mr. McKinnon retired from Ambac on January 13, 2008 and February 8, 2008, respectively, and as a result are no longer entitled to benefits under their Management Retention Agreements. Mr. Uhlein resigned from
Ambac effective on February 1, 2009, and as a result is no longer entitled to benefits under his Management Retention Agreement.
Potential Payments Upon Change-In-Control Table
(
1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
(a)
|
|
|
|
Salary
Continuation
or
Severance
($)
(b)(2)
|
|
|
|
Option
Value($)
(c)
|
|
|
|
Restricted
Stock Unit
Value($)
(d)
|
|
|
|
All Other
Severance
(e)(3)
|
|
|
|
Excise
Tax
and
Gross Up
($)
(f)(4)
|
|
|
|
Total
Payment on
Termination
($)
(g)
|
Michael A. Callen
|
|
|
|
3,705,000
|
|
|
|
0
|
|
|
|
2,483
|
|
|
|
142,800
|
|
|
|
1,725,140
|
|
|
|
5,575,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David W. Wallis
|
|
|
|
3,700,000
|
|
|
|
0
|
|
|
|
279,631
|
|
|
|
142,800
|
|
|
|
2,033,017
|
|
|
|
6,155,448
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert J. Genader
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sean T. Leonard
|
|
|
|
2,926,000
|
|
|
|
0
|
|
|
|
16,037
|
|
|
|
142,800
|
|
|
|
1,241,591
|
|
|
|
4,326,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas C. Renfield-Miller
|
|
|
|
2,970,000
|
|
|
|
0
|
|
|
|
22,331
|
|
|
|
142,800
|
|
|
|
0
|
|
|
|
3,135,131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin J. Doyle
|
|
|
|
2,602,000
|
|
|
|
0
|
|
|
|
13,666
|
|
|
|
142,800
|
|
|
|
0
|
|
|
|
2,758,466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Shoback
|
|
|
|
1,925,000
|
|
|
|
0
|
|
|
|
14,605
|
|
|
|
142,800
|
|
|
|
0
|
|
|
|
2,082,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John W. Uhlein III
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William T. McKinnon
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) This scenario assumes a Change in Control at Ambacs year end 2008 stock price $1.31 on
December 31, 2008 and all equity awards cashed out and settled.
(2) Two times the highest salary plus two times the product of the highest bonus percentage (
as a percentage of base salary
) times the highest base salary, except for Mr. Wallis,
whose formula is described above under Management Retention AgreementAmendment to CEO Change in Control Agreement on page 63.
(3) All other severance includes estimates of two years additional (i) SIP participation,
(ii) financial planning and outplacement, and (iii) welfare and fringe benefits.
(4) If total compensation and benefits exceed three times an officers average W-2 compensation for
the five years preceding the change in control, a portion of the compensation and benefits may be subject to a nondeductible excise tax under Section 280G of the Internal Revenue Code, with variable impact on officers with Management Retention
Agreements. To ensure Management Retention Agreement benefits are equivalent for all participants, Ambac has agreed to provide a gross-up of this excise tax (
but not of any other tax payable on the executives compensation and benefits
).
(5) Messrs.
Genader, Uhlein and McKinnon were no longer in office as of December 31, 2008 and as such, they would not have received any benefit under the Management Retention Agreement if a change in control had occurred as of that date. Please refer to
page 66 below for information on the benefits that Messrs. Uhlein and McKinnon received upon their retirements and to the Summary Compensation Table above on page 49 for information on the benefits that Mr. Genader received upon his retirement.
|
65
Employment Agreement with William T. McKinnon
In General
|
On January 30, 2007, Ambac entered into an employment agreement with Mr. McKinnon (the
McKinnon Agreement
), which replaced his previous employment agreement. The new
agreement provided for an employment term that was scheduled to continue until January 30, 2009 (the
Term
).
|
The McKinnon Agreement provided for Mr. McKinnon to serve as Senior Managing Director and Chief Risk Officer. On February 8, 2008,
Mr. McKinnon retired. Pursuant to the McKinnon Agreement, for 2007, Mr. McKinnon received a base salary of $400,000 and guaranteed incentive compensation consisting of a cash bonus of $800,000, a stock option grant with an implied value
(determined using the Black-Scholes option valuation methodology) of $325,000 and a grant of $425,000 in RSUs. Upon his retirement, these options and RSUs vested. In accordance with the terms of the McKinnon Agreement, for 2008, Mr. McKinnon
continued to receive his base salary of $400,000 on a bi-weekly basis. In addition, in January 2009, he received a guaranteed minimum bonus of $850,000. He also received his guaranteed long-term incentive compensation of $750,000 for the 2008
performance year which was payable in cash in January 2009.
Special Equity Grant
|
In connection with his retirement, we agreed to vest and settle on January 29, 2009, two-thirds of an award of 8,595 RSUs which was granted to Mr. McKinnon on January 29, 2007.
|
Agreement with John W. Uhlein III
In General
|
On September 18, 2008, Ambac entered into an Agreement with John W. Uhlein, III, Executive Vice President, relating to his termination of employment with Ambac. The Agreement provided for
Mr. Uhlein to resign effective February 1, 2009 (the
Resignation Date
). Pursuant to the Agreement, Mr. Uhlein continued to receive his regular salary and benefits through the Resignation Date and continued to
report to Ambacs CEO and provide transition and consulting services as requested by the CEO. The Agreement provides for Mr. Uhlein to be awarded a Bonus of $750,000 for the 2008 performance year (the
2008 Bonus
)
and a severance amount of $350,000 (
Severance Award
) upon execution of a Waiver and General Release Agreement. This 2008 Bonus and Severance Award are in recognition of services that Mr. Uhlein performed in 2008 and as
consideration for his execution of a Waiver and General Release Agreement. Additionally, Mr. Uhlein agreed to restrictions concerning non-disclosure of proprietary information and non-solicitation of Ambacs customers or any account of
Ambac. The Agreement also provides Mr. Uhlein certain additional benefits including (i) the acceleration of the vesting of 21,334 Ambac stock options and (ii) up to $25,000 for legal expenses and outplacement services. In addition,
Mr. Uhleins Agreement provides that he will continue to be eligible to participate in all medical dental and prescription drug programs available to Ambacs employees through January 1, 2010.
|
66
Equity Compensation Plan Information
The following table shows the total number of outstanding options and shares
available for other future issuances of options under all of our equity compensation plans as of December 31, 2008.
|
|
|
|
|
|
|
|
Plan Category
|
|
Number of
Securities to be
Issued Upon
Exercise
of
Outstanding Options,
Warrants and
Rights(#)
(a)(1)
|
|
Weighted-Average
Exercise
Price of
Outstanding Options,
Warrants and Rights
($)
(b)(2)
|
|
Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
(excluding securities
reflected in column
(a)(#)
(c)(3)
|
Equity Compensation Plans
Approved by Security Holders
|
|
8,125,936
|
|
$
|
51.67
|
|
9,658,446
|
Equity Compensation Plans Not Approved by Security
Holders
(4)
|
|
0
|
|
|
0
|
|
0
|
Total
|
|
8,125,936
|
|
$
|
51.67
|
|
9,658,446
|
|
(1)
|
This amount includes 39,688 shares subject to stock options outstanding under the Directors Plan and 5,037,719 subject to stock options outstanding under the Equity Plan, plus
307,722 shares subject to restricted stock units under the Directors Plan and 2,740,807 shares subject to restricted stock units under the Equity Plan.
|
|
|
(2)
|
Weighted average exercise price of outstanding stock options; excludes restricted stock units.
|
|
|
(3)
|
This amount includes 110,653 shares available under the Directors Plan of which 77,479 shares are available for future awards of restricted stock and restricted stock units, and
9,547,793 shares available under the Equity Plan, of which 3,103,336 shares are available for future awards of stock, restricted stock units, performance units, or other awards consistent with the purposes of the plan as determined by the
Compensation Committee.
|
|
|
(4)
|
All of Ambacs equity compensation plans have been approved by security holders.
|
|
67
D
ISCUSSION
OF
P
ROPOSALS
R
ECOMMENDED
BY
THE
B
OARD
Proposal 1: Elect Eight Directors
General
The Board has nominated eight
directors for election at the Annual Meeting. Each nominee is currently serving as a director. If you elect them, they will hold office until the next Annual Meeting or until their successors have been elected. Each nominee also serves as a director
of Ambac Assurance.
We know of no reason why any nominee may
be unable to serve as a director. If any nominee is unable to serve, your proxy may vote for another nominee proposed by the Board, or the Board may reduce the number of directors to be elected. If any director resigns, dies or is otherwise unable
to serve out his or her term, or the Board increases the number of directors, the Board may fill the vacancy until the next Annual Meeting.
Selection of New Director
Upon the resignation of W. Grant Gregory in January 2008 and the Boards decision to appoint Mr. Callen as an Interim Chief Executive Officer,
the Governance Committee thought it was prudent to search for a new independent director. As such, members of the Board identified potential board candidates with finance experience. Mr. Callen, Ambacs Executive Chairman, provided the
name of Paul DeRosa to the Governance Committee to consider for inclusion in a list of potential director candidates. After the Governance Committee reviewed the list of potential director candidates, the Governance Committee determined that
Mr. DeRosa best fit its criteria. The Governance Committee Chair than asked several Committee members to meet with Mr. DeRosa so that the Committee members could assess Mr. DeRosa as a director candidate. All Committee members who met
Mr. DeRosa recommended him as a potential director to the Committee. The Committee, in turn, unanimously recommended to the full Board that Mr. DeRosa be appointed to the Board and the Ambac Assurance Board. The Board followed the
Committees recommendation and appointed Mr. DeRosa to the Ambac Board and the Ambac Assurance Board.
N
OMINEES
|
|
|
Michael A. Callen
Age 68
Director since 1991
|
|
Executive Chairman of Ambac and Ambac Assurance
since January 2008. On October 21, 2008, Mr. Callen stepped down from his position as Interim President and Chief Executive
Officer of Ambac and Ambac Assurance, but continues to act as Executive Chairman of Ambac and Ambac Assurance. On January 16, 2008 Mr. Callen was appointed Chairman and Interim President and Chief Executive Officer of Ambac and Ambac
Assurance. He served as the President of Avalon Avalon Argus Associates, LLC, a financial consulting firm from April 1996 until January 2008. Mr. Callen was Special Advisor to the National Commercial Bank located in Jeddah in the Kingdom of
Saudi Arabia from April 1993 through April 1996. He was an independent consultant from January 1992 until June 1993, and an Adjunct Professor at Columbia University Business School during 1992. He was a director of Citicorp and Citibank and a Sector
Executive for Citicorp from 1987 until January 1992.
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Jill M. Considine
Age 64
Director since 2000
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Non Executive Chairman of Butterfield Fulcrum Group Ltd.
since September 2008;
Chair of Fulcrum Group Ltd.
(
predecessor company
) since January 2008. Ms. Considine
served as Senior Advisor to the Depository Trust & Clearing Corporation and its subsidiaries (
securities depository and clearing house
) from August 2007 to April 2008, having served as Chairman since 2006, and as both Chairman and
Chief Executive Officer from January 1998 to August 2006. Prior to joining The Depository Trust Company, Ms. Considine served as the President of the New York Clearing House Association, L.L.C. from 1993 to 1998. Ms. Considine served
as a Managing Director, Chief Administrative Officer and as a member of the Board of Directors of American Express Bank Ltd., from 1991 to 1993. Prior to that, Ms. Considine served as the New York State Superintendent of Banks from 1985 to
1991. Ms. Considine also serves as a director of the Atlantic Mutual Insurance Companies and The Interpublic Group of Companies, Inc. On January 30, 2008, Ms. Considine became the Chairman of the Board of Directors of Fulcrum Limited,
a leading global administrator for the hedge fund and alternative asset management industry. In January 2008, Ms. Considine also began serving as trustee of the AIG Credit Facility Trust.
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Paul DeRosa
Age 68
Director since July 2008
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Principal, Mt. Lucas Management Corporation (hedge fund management)
since 1998.
From March 1988 to July 1995, Mr. DeRosa served as a co-founder of Eastbridge Capital Inc., a
bond trading company and primary dealer in United Treasury bonds, where he acted as a Managing Director. He became the CEO in 1995 and served in that capacity until he left for Mt. Lucas in 1998. Prior to his service with Eastbridge, Mr. DeRosa
worked for Citibank N.A., where he was responsible for developing Citibanks business in financial derivatives and acted as the head of the banks proprietary bond trading in the early 1980s. Mr. DeRosa has also served as a
research economist at the Federal Reserve Bank of New York.
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Philip Duff
Age 51
Director since 2007
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CEO and General Partner of Duff Capital Advisors
since January 2007. Prior to founding Duff Capital Advisors (
formerly known as
Robson Ventures
), Mr. Duff was one of the founding partners of FrontPoint Partners LLC, an investment management firm, and served as its Chairman and CEO from November 2000 to December 2006. In December 2006, FrontPoint Partners was sold to
Morgan Stanley. Prior to his starting FrontPoint Partners in 2000, Mr. Duff was the Chief Operating Officer and Senior Managing Director of Tiger
Management from 1998 to 2000. Before joining Tiger, Mr. Duff spent much of his career at Morgan Stanley and served as the Chief Financial Officer of Morgan Stanley from 1994 to 1997. From 1997 to 1998, Mr. Duff served as President
and CEO of VanKampen Investments, a mutual fund acquired by Morgan Stanley. Mr. Duff started his career at Morgan Stanley in 1984 in investment banking, where he became head of the Financial Institutions Group.
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Thomas C. Theobald
Age 71
Director since 2004
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Senior Advisor for Chicago Growth Partners (Formerly William Blair Capital Partners) and former Chairman and Chief Executive Officer of Continental Bank Corp.
Mr. Theobald joined
William Blair Capital Partners in 1994 following his role as Chairman and CEO of Continental Bank, where he had served since 1987 until its sale to BankAmerica in 1994. Prior to 1987, Mr. Theobald worked at Citicorp/Citibank for over 25 years in
various capacities
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in the domestic and international sectors, including serving as Vice Chairman from 1982 to 1987. Mr. Theobald also serves as the Chairman of the Board for Columbia Mutual Funds and as a
director for Anixter International, Jones Lang LaSalle Incorporated and Ventas Inc.
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Laura S. Unger
Age 48
Director since 2002
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Private Consultant and Former SEC Commissioner
. Ms. Unger currently has her own consulting business, advising clients on a range of securities, legal, regulatory and policy matters.
She has also served as the Independent Consultant to JPMorgan for the global analyst conflict settlement since 2003. After resigning her Commissioner seat, Ms. Unger joined CNBC in July 2002 and served as CNBCs Regulatory Expert until
July 2003. From February 2001 until August 2001, Ms. Unger served as Acting Chairman of the SEC. From November 1997 to February 2002, Ms. Unger served as a SEC Commissioner. Before being appointed to the SEC, Ms. Unger served as
Securities Counsel to the United States Senate Committee on Banking, Housing and Urban Affairs from October 1990 to November 1997. Prior to working on Capitol Hill, Ms. Unger was an attorney with the Enforcement Division of the SEC in
Washington, D.C. and New York City. Ms. Unger also serves as a director of CA, Inc. (formerly Computer Associates) and the IQ Fund Complex.
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Henry D. G. Wallace
Age 63
Director since 2004
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Former Group Vice President and Chief Financial Officer of Ford Motor Company
(auto manufacturing)
. Mr. Wallace was Group Vice President and Chief Financial Officer of
Ford Motor Company from January 1999 until he retired in December 2001. In 1998, he served as Vice President of Strategic Planning and CFO for Fords European Operations. From 1996-1997, he served as President and CEO of Mazda Motor
Corporation. Mr. Wallace also serves as a director of Diebold, Inc., Lear Corporation and Hayes Lemmerz International, Inc.
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David W. Wallis
Age 49
Director since October 2008
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President and Chief Executive Officer of Ambac and Ambac Assurance
since October 2008. On October 21, 2008, Mr. Wallis was appointed President and Chief Executive Officer of
Ambac and Ambac Assurance. From February 2008 until October 2008, Mr. Wallis served as the Chief Risk Officer of Ambac and Ambac Assurance and had executive responsibility for Credit Risk Management, Capital and Risk Analysis, Risk Transfer and
Portfolio Risk Management. From July 2005 to January 2008, Mr. Wallis served as a Senior Managing Director and Head of Portfolio and Market Risk Management. In 2003, he transferred to Ambacs New York headquarters as a Managing Director
within the Credit Risk Management team. He joined Ambacs London Office in 1996 as a First Vice President where he helped develop and lead the European Structured Finance and Securitization business, becoming a Managing Director in 1999. Prior
to joining Ambac in 1996, he was an investment banker at NatWest in the Debt Structuring Group.
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The Board recommends that you vote
FOR
the election of all eight nominees for director.
70
Proposal 2: Ratify Selection of KPMG LLP, an Independent Registered Public Accounting Firm, as
Independent Auditors for 2009
We are asking you to
ratify the Audit and Risk Assessment Committee of the Board of Directors selection of KPMG LLP, an independent registered public accounting firm, as Ambacs independent auditors for 2009. KPMG LLP has served as the independent auditors of
Ambac Assurance since 1985 and of Ambac since our incorporation in 1991.
Representatives of KPMG LLP will attend the Annual Meeting to answer your questions. They also will have the opportunity to make a statement if they desire to do so. The work performed by KPMG LLP during 2008 and the
related fees are set forth below.
Audit and All Other Fees
The following table presents fees for professional audit services rendered by
KPMG LLP for the audit of Ambacs annual financial statements for the years ended December 31, 2008 and December 31, 2007, and fees billed for other services rendered by KPMG LLP during those periods. All of the fees for fiscal years
2008 and 2007 presented below were approved by Ambacs Audit and Risk Assessment Committee. All such services were pre-approved by the Committee in accordance with the pre-approval policy.
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Audit Related Expenses
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2008
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2007
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Audit Fees
(1)
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$
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3,299,200
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$
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3,069,000
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Audit Related Fees
(2)
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41,500
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114,000
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Tax Fees
(3)
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156,200
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104,000
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All Other Fees
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0
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0
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Total
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$
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3,496,900
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$
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3,287,000
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(1) Audit fees consisted of audit work performed in connection with the annual and quarterly financial
statements, the audit of internal control over financial
reporting as well as work generally only the
independent
auditor can reasonably be expected to provide, such as statutory audits, consents and
comfort letters and accounting advice on completed transactions.
(2) Audit related fees consisted principally of audits of employee benefit plans and certain accounting
consultations.
(3) Tax fees consist
principally of tax compliance services and tax advice to Ambac and its UK insurance
subsidiaries.
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Policy on Audit and Risk Assessment Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent
Auditors
Consistent with SEC policies regarding
auditor independence, the Audit and Risk Assessment Committee has responsibility for appointing, setting compensation and overseeing the work of the independent auditor. In recognition of this responsibility, the Audit and Risk Assessment Committee
has established a policy to pre-approve all audit and permissible non-audit services provided by the independent auditor.
Prior to engagement of the independent auditor for the next years audit, management will submit an aggregate of services expected to be rendered
during that year for each of four categories of services to the Audit and Risk Assessment Committee for approval.
1.
Audit
services include audit work performed in connection with the annual and quarterly financial statements, the audit of internal
control over financial reporting as well as work that generally only the independent auditor can reasonably be expected to provide, including consents, comfort letters, statutory audits, and attest services.
2.
Audit-Related
services are for assurance and related
services that are traditionally performed by the independent auditor, including due diligence related to mergers and acquisitions, employee benefit plan audits, agreed upon procedures and certain consultation regarding financial accounting and/or
reporting standards.
3.
Tax
services include all
services performed by the independent auditor for tax compliance and tax advice.
4.
Other Fees
are those associated with services not captured in the other categories. Ambac generally does not request such services from the independent auditor.
Prior to engagement, the Audit and Risk Assessment Committee pre-approves
these services by category of service. The fees are budgeted and the Audit and Risk Assessment Committee requires the independent auditor and management to report actual fees versus the budget periodically throughout the year by category of service.
During the year, circumstances may arise when it may become necessary to engage the independent auditor for additional services not contemplated in the original pre-approval. In those instances, any audit services provided by the independent auditor
will be pre-approved by the Audit and Risk Assessment Committee or, between meetings of the Audit and Risk Assessment Committee, by its Chairman pursuant to authority delegated by the Audit and Risk Assessment Committee. The Chairman reports all
pre-approval decisions made by him at the next meeting of the Audit and Risk Assessment Committee, and he has undertaken to confer with the Audit and Risk Assessment Committee to the extent that any engagement for which his pre-approval is sought is
expected to generate fees for the independent auditor in excess of $100,000.
The Board recommends
that you vote
FOR
the ratification of the selection of KPMG LLP,
an independent registered public accounting firm, as
independent auditors for 2009.
72
I
NFORMATION
A
BOUT
S
TOCKHOLDER
P
ROPOSALS
The Governance Committee will
consider director candidates recommended by shareholders. The Governance Committee has established criteria for director candidates, which is discussed in more detail above on page 14.
Under our By-laws, if you wish to nominate a director or bring other business before the stockholders:
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You must notify the Corporate Secretary in writing not less than 60 days nor more than 90 days before the Annual Meeting.
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If we give you less than 70 days notice of the meeting date, however, you may notify us within 10 days after the notice was mailed or publicly disclosed.
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Your notice must contain the specific information required in our By-laws.
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Please note that these By-laws requirements relate only to matters you wish to bring before your fellow stockholders at an
Annual Meeting. They do not apply to proposals that you wish to have included in our proxy statement.
If you wish to submit proposals to be included in our 2010 proxy statement, we must receive them on or before Friday, November 25, 2009. Please
address your proposals to:
Anne Gill Kelly, Corporate Secretary, Ambac Financial Group, Inc., One State Street Plaza, New York, New York 10004.
If you would like a copy of our By-laws, we will send you one without charge. Please write to the Corporate Secretary of Ambac.
By order of the Board of Directors,
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Anne Gill Kelly
Managing Director, Corporate Secretary
and Assistant General Counsel
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March 25, 2009
73
Appendix A
Policy Regarding Determination of Independence
The Board of Directors of Ambac Financial Group, Inc. (
together with its consolidated subsidiaries,
Ambac
),
will determine which of its members are independent for purposes of the NYSE rules on an annual basis at the time the Board approves director nominees for inclusion in the proxy statement issued in connection with the annual meeting of shareholders
and, if a director is appointed to the Board between annual meetings, at the time of such appointment. In addition, the Board will reconsider a directors status if his or her employment changes. The Board may determine a director to be
independent only if the Board affirmatively determines that the director has no material relationship with Ambac (
either directly or as a director, partner, shareholder and/or officer of an organization that has a relationship with Ambac
).
The Board, pursuant to the recommendation of the Governance
Committee, has established the following standards to assist it in determining independence. However, if a director has a relationship that violates any standard in Paragraphs A or C, then that director will not be considered independent, regardless
of whether the relationship would otherwise be deemed not material by any other standard. In the context of the other standards, the fact that a particular relationship or transaction either is not addressed or exceeds the thresholds shall not
create a presumption that the director is or is not independent. In that case, the Board will determine whether, after taking into account all relevant facts and circumstances, relationships or transactions that are not addressed or that exceed the
thresholds are, in the Boards judgment, material, and therefore whether the affected director is independent.
Employment/Other Compensation
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A.
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In no event will a director be considered independent IF within the preceding three (3) years:
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Employment by Ambac
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1.
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the director was employed by Ambac or has an immediate family member (as defined below) who is or has been employed by Ambac as an executive officer (as defined below); or
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Direct Compensation from
Ambac
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2.
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the director, or an immediate family member of the director, received more than one hundred thousand dollars ($100,000) per year in direct compensation from Ambac (
not
including directors fees and pension or other forms of deferred compensation for prior service with Ambac
); or
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Employment by Ambacs Independent Auditor
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3.
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the director was affiliated with or employed by Ambacs independent auditor or an immediate family member was affiliated with or employed by Ambacs independent
auditor as a partner, principal, manager, or in any other professional capacity; or
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A-1
Compensation Committee Interlock
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4.
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the director or an immediate family member was employed as an executive officer by a company where an executive officer of Ambac was on the Compensation Committee of that
companys board of directors.
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Directors Fees
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B.
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The receipt by a director of director and committee fees, including regular benefits received by other directors, and pension or other forms of deferred compensation for
prior service (provided that such compensation is not in any way contingent on continued service), from Ambac shall not be deemed to be a material relationship or transaction that would cause such director not to be independent.
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Transactions and Other Business Relationships
Payments for Property or Services by a Director-Affiliated Entity
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C.
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A director will NOT be considered independent if such director is a current employee of, or has an immediate family member who is an executive officer of another company or
tax-exempt organization that has made payments to, or received payments from, Ambac for property or services in an amount which, in any of the last three fiscal years of the other company, has exceeded the greater of one million dollars ($1,000,000)
or two percent (2%) of such other companys consolidated gross revenues.
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D.
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The following commercial relationships will NOT be considered to be material relationships that would impair a directors independence:
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Indebtedness
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1.
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a director or an immediate family member of a director of Ambac is an executive officer of another company or tax-exempt organization which is indebted to Ambac, or to which
Ambac is indebted, and the total amount of either organizations indebtedness to the other is less than the greater of one million dollars ($1,000,000) or one percent (1%) of the total consolidated assets of the organization for which he
or she serves as an executive officer; or
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Ordinary Course of Business Transactions
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2.
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a director or an immediate family member of a director is an executive officer of a company or other organization that has a business relationship with Ambac including, but
not limited to underwriting financial guarantee insurance, trading in securities or derivatives and co-investment in financial transactions and the relationship is made or extended on terms and under circumstances that are substantially similar to
those prevailing at the time with unrelated third parties; provided however, that Ambacs gross fee revenues from such transactions (
together with other payments for property or services in the applicable fiscal year, if any
), do not
exceed the threshold set forth in Paragraph C above.
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A-2
Director Interests in Parties Transacting with Ambac
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E.
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A relationship arising solely from a directors ownership of an equity or limited partnership interest in a party that engages in a transaction with Ambac shall not be
deemed a material relationship or transaction that would cause a director not to be independent so long as such directors ownership interest does not exceed 5% of the total equity or partnership interests in that other party.
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Directors of Companies Transacting with Ambac
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F.
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A relationship arising solely from a directors position as a director or advisory director of another company or tax-exempt organization that engages in a transaction
with Ambac shall not be deemed a material relationship or transaction that would cause a director not to be independent.
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Contributions to Tax-Exempt Organizations
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G.
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It will not be considered a material relationship that would impair a directors independence if a director of Ambac, or a directors spouse, serves as an executive
officer of a tax-exempt organization, and Ambacs discretionary charitable contributions to the organization, in the aggregate, are less than five percent (5%) or two hundred thousand dollars ($200,000), whichever is greater, of that
organizations latest, publicly available, gross revenues.
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Extension of Credit
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H.
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Ambac will not make any personal loans or extensions of credit to directors or executive officers.
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Other
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I.
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Any other relationship or transaction that is not covered by any of the standards listed above and in which the amount involved does not exceed $120,000 in any fiscal year
shall not be deemed a material relationship or transaction that would cause a director not to be independent.
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Disclosure of Material Circumstances
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J.
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To help maintain the independence of the Board, all directors are required to deal at arms length with Ambac and its subsidiaries and to disclose circumstances material to
the director that might be perceived as a conflict of interest.
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A-3
Definitions:
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K.
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For purposes of this policy:
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1.
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Executive Officer means an entitys president, principal financial officer, principal accounting officer (
or if there is no such accounting officer, the
controller
), and any vice-president of the entity in charge of a principal business unit, division or function, any other officer who performs a policy-making function, or any other person who performs similar policy-making function, or any
other person who performs similar policy-making functions for the entity. In the case of any entity whose executive officers are subject to Section 16 of the Securities Exchange Act of 1934, those individuals (
and only those individuals
)
whom the entity identifies as its executive officers for purposes of Section 16 shall be considered executive officers of the entity for purposes of these independence standards.
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2.
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Immediate family members of a director mean the directors spouse, parents, children, step-parents, step-children, siblings, mothers-in-law, fathers-in-law,
sons-in-law, daughters-in-law, brothers-in-law, sisters-in-law and anyone (other than domestic employees) who shares the directors home. When applying the look-back provisions of the standards, persons who are no longer immediate family
members as a result of legal separation or divorce or those who have died or become incapacitated shall not be considered.
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A-4
ONE STATE STREET PLAZA, NEW YORK, NY 10004
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AMBAC FINANCIAL GROUP, INC.
ANNE GILL KELLY
ONE STATE STREET PLAZA
NEW YORK, NY 10004
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VOTE BY INTERNET - www.proxyvote.com
Use the
Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the
instructions to obtain your records and to create an electronic voting instruction form.
Electronic Delivery of Future PROXY MATERIALS
If you would like to reduce the costs incurred by Ambac Financial Group, Inc, in mailing proxy
materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and,
when prompted, indicate that you agree to receive or access stockholder communications electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M.
Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the
postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
KEEP THIS PORTION FOR YOUR RECORDS
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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DETACH AND RETURN THIS PORTION ONLY
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For
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Withhold
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For All
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To withhold authority to
vote for any individual nominee(s), mark For All Except and write the number(s) of the nominee(s) on the line below.
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The Board of Directors recommends that you vote For the following.
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1.
Election of Directors
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Nominees
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01 Michael A. Callen
06 Laura S. Unger
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02 Jill M. Considine
07 Henry D. G. Wallace
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03 Paul R. DeRosa
08 David W. Wallis
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04 Philip N. Duff
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05 Thomas C. Theobald
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The Board of Directors recommends you vote FOR the following
proposal(s).
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For
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Against
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Abstain
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2
Ratify Selection of KPMG LLP as Independent Auditors for 2009.
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Such other business as may properly come before the meeting or any adjournment thereof.
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For address change/comments, mark here.
(see
reverse for instructions)
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Yes No
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Please indicate if you plan to attend this meeting
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Materials Election
- Check this box if
you want to receive a complete set of future proxy materials by mail, at no extra cost. If you do not take action you may receive only a Notice to inform you of the Internet availability of proxy materials.
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Please sign exactly as your name(s) appear(s) hereon. When signing as attorney,
executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer.
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Signature [PLEASE SIGN WITHIN BOX]
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Signature (Joint Owners)
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0000012791_1 R2.09.03.15
Important Notice Regarding the Availability of Proxy Materials:
The Annual Report, Notice & Proxy Statement is/are available at
www.proxyvote.com
.
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AMBAC
FINANCIAL GROUP, INC.
THIS PROXY IS SOLICITED ON
BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF
STOCKHOLDERS
May 5th, 2009
The undersigned hereby appoints Gregg L. Bienstock and Anne Gill Kelly, and each
of them, proxies, with power of substitution to vote all shares of Common Stock of Ambac Financial Group, Inc. which the undersigned is entitled to vote at the Annual Meeting of Stockholders to be held on Tuesday, May 5, 2009 at 2:00 PM local time,
at Ambacs executive offices, One State Street Plaza, New York, New York, and at any adjournments of the Annual Meeting. The proxies have the authority to vote as directed on the reverse side of this card with the same effect as though the
undersigned were present in person and voting. The proxies are further authorized in their discretion to vote upon such other business as may properly come before the Annual Meeting and any adjournments of the Annual Meeting. The undersigned revokes
all proxies previously given to vote at the Annual Meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE STOCKHOLDERS. IF NO SUCH DIRECTIONS ARE MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES LISTED ON THE REVERSE SIDE FOR THE BOARD OF DIRECTORS AND FOR
EACH PROPOSAL. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED REPLY ENVELOPE
Address change/comments:
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(If you noted any
Address Changes and/or Comments above, please mark corresponding box on the reverse side.)
Continued and to be signed on reverse side
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0000012791_2 R2.09.03.15
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